The economy received some good and bad news this week as several key economic indicators show the United States may not be in a recession. The results for the trucking industry, though, are somewhat mixed.
Analyst Chris Brady, president of Commercial Motor Vehicle Consulting, said the news is really a continuation of the pattern the industry has been in for a while. “You do have some freight markets in good shape, but you have some detriments” including consumer spending. “The freight environment is really just sluggish,” he said.
The industry is seeing positive signs in exports, up 5.5% in the first quarter, and agricultural commodities, as more U.S. farm products are shipped overseas. Even imports showed an increase in the first quarter, up 2.5% vs. a decrease of 1.4% in the fourth quarter. Weakness in the housing industry though, along with the struggling auto industry continues to plague trucking, Brady said. Residential construction is down a seasonably adjusted 20% for the third straight quarter, he added, adding to the woes.
With continued weakness in housing and consumer spending, Brady doesn’t foresee growth in the trucking industry for the next two quarters. “A sluggish environment plus high fuel costs just puts a squeeze on profits,” Brady said.
Overall, the government reported the GDP – gross domestic product – showed a 0.6% increase, the second consecutive quarter it has grown at that pace. While it shows the economy is not in a technical recession, it does indicate continued slowing. Consumer spending was up 0.4%.
In response, the Federal Reserve cut another ¼ point off its key interest rate, dropping the rate to 2%. It is the seventh cut since September, when the rate was at 5.25%. There are indications that the Fed may start shifting its focus to inflation control, analysts said.
On Friday, the Labor Department reported the economy lost just 20,000 jobs in April, below the 85,000 analysts expected. It is the fourth consecutive month of decline. The unemployment rate dropped to 5% from 5.1% in March, leading some experts to believe the economy is improving.
Analyst Satish Jindel, president of SJ Consulting, doesn’t see that making a significant impact. “I would say people are reading too much into it,” he said. “The real way to judge is consumer confidence.”
Consumer confidence took a hit in April as well, reaching 62.3%, down from the 65.9 in March. It is the lowest level for confidence since the index reached 61.4 in March 2003.
Like Brady, Jindel sees flat growth for the trucking industry. “The slowing economy with the high fuel prices … none of these changes will have a noticeable change in the industry,” he said.
Jindel added that trucking companies need to focus on managing their costs in the coming months as he doesn’t see any real revenue gains for the industry.
