Though the Federal Reserve is expressing cautious optimism that the U.S. economy may be stabilizing, albeit at a weak level, many observers within trucking feel the recession hasn't yet reached a firm bottom.
Data released this week by the Fed in its monthly "Beige Book" indicates that while overall economic activity contracted further or remained weak, five of its 12 bank districts noted a moderation in the pace of decline – and several saw signs that activity in some sectors was stabilizing at a low level.
That being said, trucking industry experts contend that most other U.S. economic indicators remain decidedly negative. "I think it is much too early to call a bottom," Bob Costello, chief economist for the American Trucking Assns. told FleetOwner. "The Fed even said [the U.S.] economy is still declining – just at a slower pace."
Though the Federal Reserve is expressing cautious optimism that the U.S. economy may be stabilizing, albeit at a weak level, many observers within trucking feel the recession hasn't yet reached a firm bottom.
Data released this week by the Fed in its monthly "Beige Book" indicates that while overall economic activity contracted further or remained weak, five of its 12 bank districts noted a moderation in the pace of decline – and several saw signs that activity in some sectors was stabilizing at a low level.
That being said, trucking industry experts contend that most other U.S. economic indicators remain decidedly negative. "I think it is much too early to call a bottom," Bob Costello, chief economist for the American Trucking Assns. told FleetOwner. "The Fed even said [the U.S.] economy is still declining – just at a slower pace."
Costello added that there's been other bad economic news, such as a steep decline in new home construction. Housing starts fell to a seasonally adjusted annual rate of 510,000 in March, according to the Commerce Department – down nearly 11% from a revised 572,000 starts in February. Starts have not been this low since January, when they fell to an annual rate of 477,000, which was the lowest since the government began keeping records in 1959.
Carriers themselves remain decidedly bearish on the economy, as freight activity remains extremely soft. "Although there are some encouraging signs, there is still much uncertainty," noted Henry Gerkens, president & CEO of Landstar System, in the company's first-quarter earnings report.
"Overall, the number of loads hauled during the first quarter was approximately 17% lower than the number of loads hauled during the first quarter [of 2008]," he said. "Volume declines were experienced in just about every sector serviced by the company."
"The [first] quarter presented the most challenging operating environment that we have ever experienced … characterized by a severe contraction in freight volume resulting from the current economic recession and from inventory reductions by both manufacturers and retailers," noted Clifton Beckham, president & CEO of USA Truck.
"Though the current freight recession began in the third quarter of 2006, freight volume declines accelerated markedly between November 2008 and January 2009," Beckham said in the carrier's first-quarter earnings statement. "Although volumes have stabilized since January, albeit at historically low levels, the truckload industry continues to be plagued by too many trucks chasing too little freight, which is spawning fierce, and often irrational, price competition."
Still, based on the economic data now being generated, the U.S. is at least closer to the end of its economic downturn than before, said Eric Starks, president of economic research firm FTR Associates.
"What we're getting is a general sense that the heavy bleeding in the economy has stopped," he told FleetOwner. "Are we at the bottom? We can't really say for sure. Are we closer to the bottom than we were last month? That's definitely a yes. The bulk of the pain has been yanked out of the system by now. Looking at current freight data, it's leveling off somewhat, though it's still down."
Going forward, Starks said his firm and other economic analysts will be looking for more concrete signs of economic stabilization.
"We want to see a few months of stable numbers, even if below trend lines, to indicate we've reach the bottom," he said. "We want to see factors such as the 1.5% decline in manufacturing cut in half or approaching zero. We want to see Class 8 [new truck ] order activity get close to 10,000 a month – that's a good bellwether. If we have a good plateau of economic indicators for several months, that's when we'll know we've reached the bottom for sure."
