Economy Taking a Summer Breather

The latest roundup of economic reports indicate that freight volumes will continue to sustain its high levels, although it appears that the economy softened in July.

Freight tonnage fell a seasonally adjusted 0.3% in July, the American Trucking Associations (ATA) said today. Although July is traditionally a weaker tonnage month than June, ATA noted that July’s unadjusted decrease was more pronounced than usual.

“I think freight tonnage will remain pretty good,” ATA’s chief economist Bob Costello told Fleet Owner. “It’s [freight tonnage] much stronger than we’ve seen in the last several years.”

Costello warned that going into the second half of ’04, there won’t be any more of the dramatic year-over-year increases in economic data that was posted frequently during the first half. “The first half was easy— that’s because the first half of 2003 was very weak,” he said.

That said, Costello expects overall economic growth will continue through the second half. “While the economy is on track and is still growing, I don’t think it’s growing quite as fast as it once was. It looks like retail sales [slowing down] will hold down the economy’s overall potential,” he explained.

Although recent economic reports indicate a slowdown in consumer spending growth, on the positive side capital expenditures showed no weaknesses in July. For example, the U.S. Census Bureau reported that of manufactured durable goods shipments, machinery in July posted the largest increase— up 3.2% to $25 billion.

Capital expenditures account for about 10- to 12% of the overall value of manufacturing production, Costello said.

The report on manufactured durable goods confirms that the manufacturing sector is continuing to expand. New orders increased 1.7% to $195.6 billion, shipments increased 0.1% to $196.8 billion, while the backlog of unfilled orders continued to expand 1.2% to $533.5 billion.

Rising orders and expanding backlogs in the manufacturing sector usually indicates that goods will continue to move in and out of factories for trucks to haul.

New home sales dropped 6.4% in July, according to a separate report released by the Census Bureau. The figure is volatile, however, as it is subject to a 10.7% margin of error.

“New homes sales is important for trucking for a lot of reasons,” he said. “For one thing, construction equipment and materials are moved— as well as a variety of durable goods such as refrigerators and stoves are related to that. Housing is one of the most difficult series [of data] to look at just because there are huge margins of error, and volatility. That’s why I take everything in context with each other.

“Overall, it is difficult to gauge the economy based on data from late summer months,” Costello said. “July and typically August are weird months— we find things tend to slow down in July because it is a natural brake in everything. The early summer is typically very good, but in July a lot of people go on vacations and gear up before back-to-school and also there are manufacturing shutdowns. There are just so many disruptions,” Costello said.

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