Skip navigation
Trucks at Work

The two faces of U.S. economic prospects

An interesting mix of factors at this point in time seems to be generating a “two-faced” outlook, if you will, for the U.S. economy.

On the one hand, while “sluggishness” will be the watchword over the next few months, one collaborative outlook predicts that by the second half of 2013, the country should start to witness decent – if not strong – economic growth.

However, on the other, a different survey of 3,200 business leaders from 44 nations indicates that optimism is in retreat – with U.S. business leaders in particular souring on the economic prospects for our nation.

The worry here is that such a negative view of the road ahead may stifle business investment, which represents a critical stream of freight for truckers, according to industry analysts.

So the question before us, then, is which “face” will the U.S. economy eventually display?

On the positive side of the ledger are predictions contained within Bloomberg BNA's annual Economic Outlook, which is what’s called a “consensus forecast” crafted by economists at 21 leading U.S. financial, consulting, and academic organizations.

Overall, in their view, major shifts in federal fiscal policy will bring about continued uncertainty and a temporary slowdown in economic growth during the first half of 2013, but a strengthening private sector is expected to boost growth in the second half of the year – with the unemployment rate declining from its current 7.8% mark to an average of 7.5% by the second half of 2013.

Posing a threat to this outlook, however, is the potential for what those economists polled by Bloomberg BNA call a “damaging federal budget crisis” if the White House and Congress cannot reach agreement on the debt ceiling increase and a long-term deficit reduction plan. So far, however, a debt-ceiling deal seems to be in the offing, while longer term efforts to curb deficit spending that’s reached $1.2 trillion annually in each of the last four years still seems way out of reach.

OK, so here’s a breakdown of the projections for the U.S. within Bloomberg BNA’s annual forecast:

  • The U.S. economy will slow in early 2013 from impacts of the payroll tax hike and constraints on federal spending, but growth will improve in second half of the year as the private sector strengthens.
  • Key drivers of growth will be business investment and job creation, the housing industry recovery, and consumer spending.
  • Job growth gains will be modest in the first six months of 2013, accelerating to 176,000 jobs per month in the second half of the year.
  • Private sector workers' total hourly compensation will grow 2.6% in 2013, up from a 2% gain in 2012, as of the third quarter.
  • The Federal Reserve will maintain its historically low near-zero federal funds rate target through at least the end of 2013.
  • The Fed will also likely will continue its program of ongoing bond purchases, known as quantitative easing, into 2014.
  • Inflation is expected to stay tame, at close to the Fed's preferred rate of about 2%.

Now, how about the rest of the world? Well, those economists polled by Bloomberg BNA seem pretty upbeat there too:

  • The Euro zone's risk of an escalating crisis has diminished, and recession is expected to end during the course of 2013 as economic growth resumes.
  • Globally, downside and upside risks are more balanced than a year ago, and stronger-than-expected growth is possible, notably in the U.S. housing and labor markets.
  • Growth in trade volume, which began picking up in the fourth quarter of 2012, will gain further momentum in 2013, led by developing countries.

Not too shabby if I say so myself especially where trade is concerned because that will help boost domestic freight volumes as a result – further burnishing the prospects for trucking, which continues to experience what one analyst calls an “OK” level of tonnage.

Yet don’t fire up the ticker tape parade just yet, because latest data from Grant Thornton LLP’s International Business Report paints a very different picture, especially where the mindset of U.S. business leaders is concerned.

According to Grant’s poll of 3,200 business leaders in 44 countries, U.S. business leaders continue to show a lack of optimism about the performance of the nation’s economy, with their optimism in fourth quarter last year falling to negative 4% – the lowest since the depths of the financial crisis.

The firm added that its findings accompany a general lack of optimism about most areas of business performance and stability. For example, the net percent balance of U.S. business leaders expecting revenues to increase in 2013 decreased by 10 percentage points from the third quarter, while profitability expectations dropped by 9 percentage points.

As far as employment goes, only a net balance of 25% of business leaders in the U.S. foresee an increase in hiring during the coming year; a 3 percentage point decrease from the previous quarter. 

“The lack of confidence in, and optimism about, our economy among the nation’s business leaders shouldn’t be a surprise to anyone, given the ongoing fragile recovery and recent drama surrounding the fiscal cliff,” noted Stephen Chipman (at right), Grant’s CEO. “During the next few months, our country’s political leaders should focus on resolving uncertainty so that business leaders, in this country and beyond, can gain the confidence in our economy that is crucial to U.S. business competitiveness and the dynamic growth that comes with it.”

The notion that the recent debate about the fiscal cliff is affecting optimism about the economy correlates with other recent research from Grant, which suggests 40% of CFOs have delayed decision making because of similar concerns.

And though 39% of respondents believe there will be increased access to financing in the next 12 months, which often helps grow a business, 48% don’t expect to see any change. Slightly encouraging is that 74% of business owners plan to give employees raises in the next 12 months, though only 12% plan to give raises above the rate of inflation.

Interestingly, the very opposite mindset is taking shape in other global markets, according to Grant’s research. For example, business optimism in the emerging markets of Latin America remained relatively stable in the past year, and actually increased to 69% in the fourth quarter, up from 61% during the same period last year. The BRIC economies (rising from 34% to 39%) also remained consistently optimistic, and there has also been an increase in Asia Pacific confidence (excluding Japan) from 23% to 28% during the same period.

By comparison, optimism in North America has been on a bit of a rollercoaster during the past year, said Chipman —going from 6% in the fourth quarter 2011 to 52% in the second quarter 2012, before falling to just 1% in the fourth quarter 2012.

“With such lack of optimism in our economy, many business owners may decide to postpone any major investments related to the future of their business – but this could be a mistake,” he stressed.

“In a market such as this, there are opportunities for certain businesses that have the foresight to concentrate on long-term growth opportunities by investing in the right people and infrastructure,” Chipman added. “Those businesses will be best positioned for success once sustained economic recovery is finally a reality.”

Such investments, of course, will be critical for sustaining – if not expanding – freight demand in the trucking space. We’ll just have to wait and see how it all plays out.

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.