Trucks at Work

No clear picture

This somewhat positive outlook for the domestic [U.S.] economy is at odds with a global economy that appears to be losing steam. In particular, a deeper-than-expected recession in Europe could easily derail the outlook for the U.S. economy.” –Ken Goldstein, an economist with The Conference Board


The economic picture – both for the U.S. and the world – remains unfortunately no clearer now than in weeks past, despite the addition of new data (some of it quite positive, truth be told).

Of course, that doesn’t leave freight carriers with an awful lot to go on as they make final tweaks to their strategies for 2012 as 2011 draws to a close. Then again, is anyone in the trucking community really surprised by the heavy amount of uncertainty clouding everyone’s crystal balls of late?

First, some news on the positive side of the ledger: The Conference Board reports that its “leading economic index” or LEI metric for the U.S. increased 0.5% in November, which followed a 0.9% increase in October and a 0.1% increase in September.

Not ticker-tape-parade numbers, by any means, but three months of steady, positive upticks in the group’s LEI is a good sign for the U.S. economy, noted Ataman Ozyildirim, one of them many economists at The Conference Board.

“November’s increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded,” he explained.

“Interest rate spread and housing permits made the largest contributions to the LEI this month, overcoming a falling average workweek in manufacturing, which reversed its October gain, and a decline in industrial production,” Ozyildirim added.

Ken Goldstein, however – another economist with The Conference Board – urged caution as this positive LEI trend line is unfortunately heading into a maelstrom of greater global economic uncertainty.


“The LEI is pointing to continued growth this winter, possibly even gaining momentum by spring. For the second month in a row, building permits made a relatively strong contribution and there is a chance that the long decline in housing is finally slowing,” he pointed out.

“However, this somewhat positive outlook for the domestic economy is at odds with a global economy that appears to be losing steam,” Goldstein stressed. “In particular, a deeper-than-expected recession in Europe could easily derail the outlook for the U.S. economy.”

The analysts at, the retail division of GAIN Capital, paint a more gloomy picture – again, though, one with some potential bright spots for the U.S.

They expect worldwide economic growth to stall, increasing the possibility of a global recession – bit as a result of that downturn, believe the U.S. dollar will become a “global safe haven,” gaining strength from repeated waves of risk aversion triggered by potential events such as European Union (EU) sovereign debt ratings downgrades, weak economic data, and ongoing credit market stresses in Europe.

“We are not anticipating an outright collapse of the euro zone, but price falls are likely to be sharper and steeper than any rises. We also can't exclude the possibility of a catastrophic decline in the stock market along the lines of the 2008 market meltdown,” said Brian Dolan, chief currency strategist at "Investors seeking relative stability will look to the U.S. dollar. Therefore, we expect the dollar to gather momentum in the first quarter.”

Other expectations from the for the first quarter of next year aren’t nearly as positive, though:

• The U.S. dollar rally they predict translates into a generally bearish outlook for commodity prices overall;

• Massive amounts of EU government and bank debt will need refinancing in 2012, yet investors remain increasingly skittish, conceivably leading to defaults;

• In addition to financial risks in 2012, investors need to judge significant political risks that could make for a volatile first quarter as well.

Canada’s BMO Financial Group also took a generally dim view of the world’s economic prospects, with Doug Porter, deputy chief economist for the firm’s BMO Capital Markets subsidiary, noting that the 2.7% growth in gross domestic product (GDP) growth predicted for 2011 now looks like it will come in at 2.3%.

“This modest gap largely reflected the many shocks that hit the global economy and Europe's deepening woes,” he said.

Andrew Busch, global currency and public policy strategist for BMO Capital Markets, added unsurprisingly that Europe has been the significant driver of the markets this year and will continue to do so in 2012.


“We have seen markets ebbing and flowing for the whole year as a result of what is happening there,” he said. “This has driven values up and down, at times in multiple percentages; it has also driven uncertainty for investing and for businesses looking to invest.”

As a result, for Europe, Busch is predicting negative GDP growth in the first half of the year, with the European Central Bank significantly easing monetary policy by mid-year to boost growth in second half.

On the plus side, he noted that the U.S. has had more economic momentum in the third and fourth quarters this year, with consumer spending holding up better than expected. Still, the uncertainty around debt and tax policy continues to hamper the economic outlook for America in 2012.

In China, Busch noted that things have slowed significantly, with GDP growth dropping to 9% in 2011 with a weak trajectory.

“There is the question of whether the Chinese will begin to ease back from the tightening of monetary and regulatory measures,” he pointed out. “We are just beginning to see consumer inflation easing; housing prices will also need to soften before more aggressive easing can occur.”

In terms of tea leaf reading, then, it’s pretty much a wash in terms of figuring out how 2012 is going to roll from an economic perspective. And that’s been pretty much the story for the back half of 2011 as well, to say the very least.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.