The Commerce Dept. today revised the third-quarter growth of the U.S. economy upwards to a seasonally adjusted annual growth rate of 4.3%. Economic growth accelerated from the second quarter’s rate of 3.3%, thanks to more consumer spending, business investment, government spending, and a still robust housing market.
Consumer spending—which accounted for about 70% of the total U.S. economy— grew 4.2%, equipment and software investment (business spending) grew 10.8%, and government expenditures grew 3.2%.
“Consumption was obviously very strong and that’s a good thing for the trucking industry,” Bob Costello, chief economist for the American Trucking Assns. told FleetOwner. “When households consume more that’s obviously good news for us. The other strength was business investment. Not only do we haul those products, but it will keep productivity strong. When businesses are more productive, that means they’ll be financially better off and that just keep the ball rolling.”
While Costello believes fourth quarter and 2006 growth won’t be as robust, he says there’s still lot of good news for trucking. “I think [the holidays] will be solid. While there may not be the frenzy there was a year ago, but in historical terms the capacity situation remains tight. I’ve talked to numerous carriers with more loads than trucks.”
Consumer spending during the holiday shopping season determines freight activity in the first quarter, he explained.
“Seasonally, the first quarter is weaker for trucking,” Costello said. “If consumer spending is weaker than retailers’ expectation, then that’s a concern. That means retailers will have excess inventory that they’ll want to work off in the first quarter.”
Looking to 2006 and beyond, Stephen Latin-Kasper, director of market data and research for the National Truck Equipment Assn., told FleetOwner that over the long-term, the growth of consumer spending will decelerate.
“Consumer spending won’t likely reach a cliff and jump, but it isn’t sustainable,” Latin-Kasper said, referring to the Federal Reserve ratcheting up interest rates. “Going forward you’ll see more debt getting paid off than created and that slows down the economy. What we’re going to see is a decline in the rate of growth.”