Fleetowner 2676 Freightshot

FTR: “Good”recovery under way for trucking and manufacturing

March 9, 2012
Forecaster sees 2.3% growth in U.S. GDP for 2012

Noel Perry, senior consultant with FTR Associates and principal of research firm Transport Fundamentals, gave a very upbeat report on the state of the U.S. economy—including its positive impact on trucking—during a “State of the Freight” webinar hosted by FTR yesterday afternoon. According to Perry, the ongoing economic recovery in the U.S. has been “good” for both trucking and manufacturing.

He pointed that [on an x-y chart that the line for] the Gross Domestic Product (GDP) of the U.S. “tended from ’92 to ’09 to be higher than [the lines for] both Industrial Production (IP) and Truckload Shipments. But after ’09, GDP went to the lowest line. This pattern will continue through the ‘twenty-teens’ because U.S. manufacturing is benefitting from government stimulus programs and from rising exports. All this [activity] drives up freight.” What’s more, Perry said the latest data shows manufacturing as a segment of the economy is growing.

Turning to what has arguably been the biggest bugaboo of this economic recovery, Perry said there is good news coming out of the housing market is that existing home sales are “almost back to ‘normal.’” That sales activity implies more purchases of consumer goods, including durables like appliances. But he reported there is bad news as well yet on the housing front: “Sale prices for new homes are still in la-la land. These sellers have not gotten the message that the market is demanding lower prices,” he asserted.

Certainly helping to boost truck freight is the rising automobile/light vehicle market. “These sales are growing due to the high average age of light vehicles [cars and trucks],” said Perry. He noted that right now the [light-vehicle] “fleet looks to be about a year older than normal. As a result, the auto market is moving up at an accelerating rate. This is very good for the economy in general and for trucking and rail in particular.”

Moving on to the all-important service sector—responsible for 80% of the U.S. economy—Perry said it too is “showing signs of life. And when these numbers go up, people start buying more consumer goods.”

Perry also examined key risks to the U.S. economy going forward. He differentiated what is happening in Europe and China in terms of both the size of the problem and whether it is an issue now or will become one later. “Europe presents a smaller problem than China does to the U.S. economy and it is happening now,” he said. “The problem China presents will hit us later and be much larger.”

He explained that Europe is now “in recession and unlikely to recover quickly unless they balance their budgets.” The risk to the U.S. economy from this involves the 22% of U.S. exports that go to Europe. “If that amount were to drop by one-third, that would equal a drop of 6% in our exports, which would equal a drop of .6% in our economy.”

As for China, the issue for the U.S. economy revolves around the fact the giant nation has avoided economic downturns for 30 years, Perry pointed out. “But at some point, their economy will start to become cyclical and when that happens, it will affect all world economies. If China’s economy drops later in this decade, then we’d have a recession, too.”

Then there’s the near-future threat of the U.S.’s own sovereign debt. “The U.S. economy will have a gun t o its head by mid-decade [thanks to this issue],” declared Perry. “It will be a struggle to get our [federal] budget balanced and the solution will come late and be problematic [politically] and so it will initially fail,” he predicted. “This won’t be happening this year or next, but late in 2013 or in 2014.” He added that if our sovereign debt risk is not mitigated in time, “debt will be downgraded and interest rates will rise.”

Turning back to the here and now, Perry said putting all the economic indicators together results in a 2012 economic forecast that is “still conservative— the recovery will see 2.3% growth in GDP for 2012,” he stated.

Sponsored Recommendations

Reducing CSA Violations & Increasing Safety With Advanced Trailer Telematics

Keep the roads safer with advanced trailer telematics. In this whitepaper, see how you can gain insights that lead to increased safety and reduced roadside incidents—keeping drivers...

80% Fewer Towable Accidents - 10 Key Strategies

After installing grille guards on all of their Class 8 trucks, a major Midwest fleet reported they had reduced their number of towable accidents by 80% post installation – including...

Proactive Fleet Safety: A Guide to Improved Efficiency and Profitability

Each year, carriers lose around 32.6 billion vehicle hours as a result of weather-related congestion. Discover how to shift from reactive to proactive, improve efficiency, and...

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!