Trucking, like the economy, appears to have turned the corner and is heading toward recovery. But there are likely to be several rough spots in the economic road ahead.
Consumers barely took their collective foot off the spending gas pedal. A drop in mortgage rates helped keep home sales strong after Sept. 11 and encouraged millions of homeowners to refinance, leaving them with more spending money. Hordes of new-vehicle buyers jumped at 0% financing deals.
Meanwhile, last summer's income tax rebate checks and tumbling oil prices meant consumers had more cash to spend, while paying less for gasoline and home heating oil. And the unemployment rate at year's end, 5.8%, was far lower than in past recessions. Most households were still receiving regular paychecks, even if bonuses and hours were off.
Now the question is whether consumers are tapped out. Mortgage rates and fuel prices are up from their lows. Consumer borrowing took a near-record jump in November, suggesting that it will taper off in the next few months — especially if unemployment keeps rising. The pattern from past recoveries is that unemployment continues to rise well after the recession officially ends. With Congress and the White House still at loggerheads on a stimulus plan, individuals shouldn't expect further tax cuts beyond the modest changes for 2002 that have already occurred.
While business spending shrank throughout 2001, consumers kept the recession short and mild. Now more and more industries are finally starting to crank up production and seem poised to rebuild shrunken inventories. At the same time, there's reason to worry that many consumers will decide they have hit their spending limits and start to cut back.
Two other generators of freight movements are government and foreign markets. Here again there are some blind curves ahead. The federal government is spending heavily in fiscal 2002, which runs through September. Although the most visible spending is for military action abroad and security personnel domestically, a lot of the outlays are also going for goods and services that generate truck trips.
But the Bush administration is threatening to hold down most categories of spending in fiscal 2003. Meanwhile, state and local governments have already had to curb or defer spending other than security, unemployment relief and welfare. Some states are also enacting limited tax increases. Few of the new revenue sources affect trucking directly but the cumulative effect is to reduce disposable income of consumers and businesses.
The economies of Canada and Mexico appear to be relatively healthy, which is good news for fleets that serve those markets directly. Their main worry is how to get across the border and back in light of much tighter security. But most major U.S. trading partners do not look ready to increase their purchases of U.S. products. That's bad news, and not just for the truckers who may be hauling to the ports. It also affects the much greater number of carriers who get business from the profits and wages earned by American exporters, their suppliers and their employees.
The bottom line: Barring an expanded foreign military or domestic security crisis, the economy should steer clear of further recession. But just as this recession was milder than most, the recovery is likely to be unusually anemic as well. That means most carriers should go slow on expanding their fleets and work forces. On the plus side, it means carriers can still drive a good bargain on new equipment and be choosy about the caliber of drivers they do add.