Cautious optimism still governs trucking outlook

Nov. 6, 2013

Despite some mixed economic indicators, many tied to the fallout from federal government shutdown back in early October, the trend lines remain in positive territory where truck freight is concerned through the end of this year, though they’ll bear closer watching in 2014.

“For the most part, things are in line with our expectations,” Jonathan Starks, director of transportation analysis for newly-renamed research firm FTR Transportation Intelligence, told Fleet Owner.

“The year-over-year [freight] numbers are pretty strong and the month-to-month numbers are strong as well,” he explained. “While they are not surging by any means, they are still continuing to grow.”

While FTR plans to provide more detail on the “state of freight” in a webinar later this week, Starks noted that one of the main factors his firm will be monitoring closely is the federal budget negotiations as the government funding agreement hammered out back in October expires Jan. 15 next year.

“That resolution really put us in a holding pattern for two or three months,” he said. “How that gets resolved will determine whether the U.S. economy still slogs along or gets more energized. We’ll have to see how that plays out.”

Concerns over government funding issues are tempering optimism in the U.S. business community as a whole, noted Stephen Chipman, CEO of consulting firm Grant Thornton LLP.

“The recent deferral yet again of budget and debt ceiling negotiations in the United States threatens to derail this global economic progress,” he pointed out. “Our country’s political leaders need to seize the opportunity to finally develop an enduring fiscal plan that provides a long-term, stable economic environment to unlock the enormous potential for U.S. business growth.”

Chipman added that his firm’s most recent International Business Report (IBR), a survey of 3,300 business leaders in 45 countries, indicated that U.S. business leaders continue to show optimism about the performance of the nation’s economy, with that “optimism” reaching a net balance of 52% in the third quarter this year, just marginally down from 55% in second quarter.

While Grant Thorton’s poll found revenue growth expectations in the U.S. slipped slightly in the third quarter – with a net 50% of businesses expect revenue to grow during the next 12 months, down from 59% in second quarter – profitability expectations climbed again reaching a net balance of 54%, up from 48% from the previous three months.

Still, freight volumes may suffer somewhat as businesses become more cautious. For example, underwhelming fall sales and continued economic and Federal budgetary concerns have U.S. retailers in a “wait and see” mode this holiday season, according to the most recent BDO USA survey.

The firm’s poll found chief marketing officers at leading U.S. retailers forecasting only a modest 2.5% increase in 2013 holiday comparable store sales compared to more optimistic projections of a 3.7% bump in holiday same store sales in 2012.

“This year’s conservative projection may reflect retailers’ concerns over the government shutdown, which occurred while the survey was fielded, and its impact on consumer confidence and spending this holiday season,” noted Doug Hart, partner in the retail and consumer product practice at BDO USA, LLP.

“We’re seeing retailers enter the holiday season with realistic, rather than optimistic, expectations,” he stressed. “Consumer confidence took a hit this summer amid slow economic growth and Federal budget challenges, and it is still uncertain at best. However, we expect to see a heavy promotional environment, which should help consumers warm up to spending this holiday season.”

FTR’s Starks added that, where trucking is concerned, industrial activity remains a bright spot, with the Institute for Supply Management (ISM) noting that its PMI measurement of industrial activity increased 0.2 percentage points from September to reach 56.4% in October.

Not only did ISM note that 14 out of 18 manufacturing sectors reporting growth, the group said October's reading reflecting the highest PMI reading of 2013 so far.

“The ISM data is still showing nice positive growth; it’s not showing us anything negative,” FTR’s Starks said. “The real key will be interpreting the data we’ll be seeing over the next two to three months as it may be somewhat more negative due to the government shutdown. Right now the concern as we head into 2014 is whether we’ll see a falloff like what occurred between the end of 2012 and beginning of 2013. That’s something we’ll have to watch.” 

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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