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FTR Gives Insight Into State of General Economy, Trucking Industry

June 11, 2013

By Kate Harlow

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To sum up the general economic outlook for the upcoming months in one sentence: More of the same for 2013 and then better in 2014.

That is how FTR Associates Senior Consultant Bill Witte predicted the overall economy will be in the near future at the recent State of Freight Summit held by FTR.

In his presentation entitled, "U.S. Economy: Do the strengths outweigh the risks?" Witte forecasted an output growth of 2.2% for 2013 and 3.1% for 2014.

He also predicted that the end of the year unemployment figures would drop to 7.2% in 2013 and would end 2014 at 6.3%.

Witte states that there are factors that could affect economic conditions and his far-out predictions for 2014. One of these factors includes the federal sequester. His model assumes that the sequester takes effect mostly in the second and third quarters of 2013. The model has the sequester being worked out before 2014, otherwise economic growth won't be as strong as he is currently predicting.

The sequester is forecasted to reduce GDP growth to the tune of four-tenths of 1% from the second quarter of 2013 through the first quarter of 2014. Other predicted outcomes from the sequester include a reduction in government expenditures by 1.5% and an average loss of 30,000 jobs per month totaling 350,000 jobs lost for the year.

When asked about the manufacturing sector specifically, Witte said, that the likelihood of seeing strong growth on the manufacturing side is not likely.

Nöel Perry, managing director and senior consultant with FTR, commented that there is a correlation between the state of manufacturing and the economic state of transportation.

"We are close to going into recession in manufacturing," Perry said. And according to him, it's just about time for a transportation freight recession.

Since 1970, Perry said that there has been a freight recession every five years on average. The longest span without a recession was seven years, and the shortest was three years.

In his presentation, "Trucking: Will you feel the crunch?" Perry focused on the most recent recovery and the outlook for the trucking industry.

In general terms, Perry stated that he wasn't really confident about freight over the next year. Specifically, there are three possibilities he is concerned about.

One: If optimism in consumers creates a "boomlet" and, in turn, a manufacturing surge, the trucking industry will not be ready for those numbers.

Two: As he stated before, every five years on average the trucking industry experiences a freight recession.

Three: Much of the rest of the world is not economically healthy.

"Europe is in a depression and China's numbers are weakening," Perry said.

Perry also predicted that as upcoming federal regulations go into affect, they could have a dramatic impact on trucking capacity. For most of 2013, roughly an additional 200,000 drivers recruits were required, but in the third quarter of 2013 (after the impact of HOS goes into affect) that number increases rapidly. As of the first quarter in 2014, Perry estimates that nearly 400,000 additional driver recruits will be required to meet increased trucking capacity demands.

As even more federal regulations go into affect the number of additional driver recruits needed reaches over 1 million at the end of 2016.

"We are in for some very substantial [driver and capacity] shortages unless we have a recession to balance that out some," Perry noted.

 

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