A widening trade deficit took its toll on the gross domestic product (GDP), the most comprehensive measure of the U.S. economy, as it showed decelerating growth on a 3.1% increase in the fourth quarter 2004. However, 2005 is still looking to be a good year for the trucking industry.
“The right factors that drive trucking are still growing,” American Trucking Assns.’ (ATA) chief economist Bob Costello told Fleet Owner, noting escalations in key segments such as consumer spending, capital investments and manufacturing.
Consumers, who have the biggest impact on the economy, showed no signs of putting their wallets on ice as personal consumption expenditures rose 4.6% for the quarter.
Separately from the GDP report, the Bureau of Economic Analysis (BEA) said today that personal income, the combined income of households in the U.S., increased 3.7%, boosted primarily by an unusually large dividend payment by Microsoft Corp. Excluding this dividend, which amounted to nearly $300 billion, personal income expanded 0.6%, or $62.7 billion, which continues the trend of households gaining spending money.
However, in the GDP report the housing market posted a marginal 0.3% increase, marking the weakest quarter in three years.
“As interest rates go up, the housing market will likely slow from recent peaks,” Costello said. “Segments that are interest-sensitive will likely slow, such as autos and home sales.”
Meanwhile, capital spending continued its double-digit rate of expansion for the third consecutive quarter on a 10.3% leap. This was fueled by a 14.9% surge in equipment and software investments.
In a separate report released by the Commerce Dept., new orders for durable goods advanced 0.6% in December. The manufacturing sector, trucking’s largest customer, fell 0.5% further behind in backorders. Large backorders put more pressure on manufacturers to increase output, which in turn stimulates trucking.
The only factor in the GDP report that may reduce tonnage is the falloff in exports, Costello noted. Exports, a major stimulus to trucking, dropped 3.9% after five consecutive quarters of increases. In the third quarter, exports rose 6%.
“For exports, it was by far the worst quarter we’ve seen since 2002,” said Costello. “However, one quarter doesn’t make a trend and the weaker dollar will help.”
The still sluggish worldwide economy may have played a role in weakening exports, Costello said. “Besides China, the U.S. is an island of strong economic growth among the industrialized nations,” Costello explained. “When you take the European Union overall, and Japan, their economies are not growing as fast. That limits the likelihood of mass exports.”
But all told, with consumer spending and manufacturing activity continuing its upward trend, tonnage growth is set to expand in the foreseeable future. Costello expects growth in consumer spending will decelerate as interest rates go up and imports get more expensive due to the weakening dollar. That leaves the currently white-hot manufacturing sector, which has been driven by capital investments and low inventories, as the brightest star on the freight tonnage horizon.
“The fastest growing segment in 2005 will continue to be manufacturing,” Costello said. “It’s expected to grow from between 4.5 and 5%, whereas consumer spending is expected to slow to 3% growth.”