ATA economist sees slow and choppy recovery

ATA economist sees slow and choppy recovery

The most positive thing American Trucking Assns. (ATA) chief economist Bob Costello could tell members at the group’s annual meeting here was: “We’ve bottomed out, and we’re moving in the right direction.”

LAS VEGAS. The most positive thing American Trucking Assns. (ATA) chief economist Bob Costello could tell members at the group’s annual meeting here was: “We’ve bottomed out, and we’re moving in the right direction.”

However that direction will involve “slow and choppy” tonnage and revenue recovery, he said during an economic panel discussion moderated by Fox News business journalist Stuart Varney.

Looking at the broader picture, Sara Johnson, managing director for global macroeconomics at HIS Global Insight, predicted a slow recovery with the U.S. GDP growing at an annualized rate of 3% for the second half of this year and then slowing to only 1.5 to 2% in 2010.

Identifying weak growth in consumer spending and a continued “serious, steep decline” in non-residential construction, Johnson added that there’s a 20% chance that the economy could “fall back into recession next year.”

While trucking historically leads the economy out of recession, Costello told ATA members that he doesn’t expect that to be the case this time. With sales falling so sharply in 2008, both retail and wholesale segments were left with exceptionally high inventories. “The economy will have recovered by the time inventory levels get back into balance with sales,” he said.

“I don’t think we’ve ever seen a drop in demand as severe as this,” Costello said when asked if this was the worst recession since World War II.

Truckload carriers have responded to a 30% drop in both revenue per mile and per ton by cutting capacity, Costello explained. “I think we’ve had the largest reduction in [TL] capacity ever, but no one knows for sure because it’s being masked by the reduction in demand,” he said.

With the slow recovery forecast, “it will take six to 12 months to get some balance in capacity and demand,” Costello said.

Sales of new trucks will lag behind the freight recovery largely because low demand has resulted in a 22.6% drop in average miles per truck, according to the ATA economist. “In essence, that [lower mileage] just extended trade cycles by a full year,” Costello said.

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