Freight forecast is mixed

Freight volume projections are mixed heading into the bottom half of 2002 because of assorted indicators about the health of the overall American economy. On the one hand, freight volume has increased since the start of this year. Bob Costello, chief economist for the American Trucking Assns. (ATA), said truck tonnage was up 3.5% in the second quarter, compared to the same period in 2001. He added

Freight volume projections are mixed heading into the bottom half of 2002 because of assorted indicators about the health of the overall American economy.

On the one hand, freight volume has increased since the start of this year. Bob Costello, chief economist for the American Trucking Assns. (ATA), said truck tonnage was up 3.5% in the second quarter, compared to the same period in 2001. He added that freight levels have picked up overall for the first half of 2002.

Meanwhile, Deloitte Research Chief Economist Carl Steidtmann has forecast a jump in consumer spending during the holiday season as a result of increased cash flow to consumers, a potential bellweather of strong demand for freight services in the fourth quarter.

"Consumers are coming into a great deal of cash, based on various economic factors, and historically when consumers find themselves with this much additional cash, they spend it," said Steidtmann in conference call.

Those factors include initial unemployment claims, real wage gains, taxes and real home prices. Unemployment remains steady at 5.7%, down from a high of 5.9% in July this year.

That, along with President Bush's tax cut last year and home prices which have climbed 10-20% in just one year, may boost consumer spending between Thanksgiving and Christmas this year.

"After two mediocre holiday selling periods in a row, retailers and their suppliers will be going into the holiday Season of 2002 riding on a tidal wave of consumer cash," he said. "Deloitte's index predicts a rise in spending from 2.5% in the first half of 2002 to a more robust 5.5% to 6% by year end."

However, several industries are reporting slumping sales in the current quarter, which could be an indicator of lower freight demand heading into the bottom half of 2002. For example, many retail department stores said sales in August were off substantially from expectations, even though August is a traditionally strong month because of back-to-school shopping.

Target Corp. said sales dropped 0.1% in the face of a 2% to 4% growth forecast. May Department Stores Co., which owns Lord & Taylor's and Hechts, watched sales drop 8.6%, while Federated Department Stores, owner of Macy's and Bloomingdale's, watched sales plummet 5.8%.

Even Wal-Mart's predictions were off, as it bagged only a 3.8% increase in sales instead of the 4% to 6% it expected.

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