U.S. headed for slow but steady growth

U.S. headed for slow but steady growth

LAS VEGAS. The U.S. has entered a period of sustained but slow economic growth that bodes well for trucking, according to economists at the 2012 Heavy Duty Dialogue

LAS VEGAS. The U.S. has entered a period of sustained but slow economic growth that bodes well for trucking, according to economists at the 2012 Heavy Duty Dialogue. Representing a consensus opinion among the speakers at this one-day conference for truck manufacturers and suppliers, Dr. Jeff Rosensweig of Emory University’s Goizueta Business School, said the country will “most likely” experience GDP growth of 2 to 2.5% this year, although the potential remains that it could reach 3 to 4%. While a double dip recession still remains a possibility, he put the likelihood of a return to negative growth at just 25%.

The peaks experienced by trucking between 2006 and 2008 won't be returning any time soon and global volatility will continue to be a threat, according to Eli Lustgarten, senior vice president of Longbow Secuities. However 2011’s moderate growth in freight tonnage helped trucking lead the growth in the country’s industrial sector with Class 8 sales reaching 254,000, up from 154,000 in 2010 and 118,400 in 2009, he said.

While “capacity remains tight and rates are holding up,” Lustgarten predicted that 2% economic growth would hold sales to just small gains this year as fleet sizes “stabilize rather than expand.” Looking a bit further out, he said regulatory changes that cut truck productivity and perhaps a move to “re-shore” manufacturing back to the U.S. could spur higher truck and trailer demand in 2013 to 2015.

The outlook for global Class 4 through 8 truck markets isn’t so rosy, according to Jonathan Storey, director of Polk’s Automotive Reports. Growth has begun slowing in several emerging markets, he said, which, combined with Europe’s economic turmoil, has made “the economic outlook gloomier than a year ago.”

After four years of far exceeding truck sales forecasts, China has run into headwinds that are softening demand in that red hot market. Overall truck sales fell 8% in 2011, Storey said, and “a further decline or, at best, modest growth is anticipated for 2012.”

While truck sales in the world’s other major emerging market, India, rose 10% last year, that was well below the 30% rise seen in 2010, he said. The increase is expected to slow even further to 2 to 4% this year, Storey predicted, as operators there face rising vehicle prices, increased operating costs and stagnant freight rates.

Brazil, is also expected to see sales drop 17% this year as expensive new emissions standards take effect and the government ends three years of tax breaks, he said. Even still, Storey pointed out that those numbers represent historically high levels for the world’s fourth largest truck market.

Offering a broader view of the economy, William Strauss, senior economist and economic advisor for the Federal Reserve Bank of Chicago, told Dialogue attendees he also sees GDP growing at the current slow but steady trend levels. While Strauss said he expects inflation to remain under control this year, he also believes unemployment rates will remain “very high.”

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