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Economic Expansion Likely To Continue

January 27, 2014

By Denise Rondini

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While some people are seeing optimism in housing starts, there's still a long way to go.
While some people are seeing optimism in housing starts, there's still a long way to go.
LAS VEGAS -- The economic expansion is likely to continue through the balance of the year, predicts Bob Dieli, president and founder of RDLB Inc., an economic research and management consulting firm.

Speaking at Heavy Duty Aftermarket Dialogue in Las Vegas, Dieli also said that we should not expect major changes in fiscal or monetary policy in the short term.

Dieli began his presentation by returning to predictions he made in January 2013 at this same event, where he had indicated that a cycle peak – which leads to a recessionary period – was not imminent. He also said then that forward progress would continue, and those predictions proved to be accurate.

He referred to a figure called Truckable Economic Activity, a proprietary measure of trucking activity developed by MacKay & Co., in his forecasting. TEA consists of all parts of GDP that use trucks. This includes consumption, exports, imports, government and investments. But Dieli noted that investment refers to capital investments for things like building.

Income and employment growth are the keys to increased consumption in 2014, he said. Spending on equipment will be the main driver in the investment area, while improved conditions overseas should provide a boost for exports. Any growth in government spending will come at the state and local level.

While many are concerned about the slow growth of the economy, Dieli said this is the new normal and that the nominal rate of GDP growth is not a sign of weakness in the economy. It is how we can expect the economy to perform over the next five years.

One area of concern is the employment rate – and more specifically, the number of weeks people are unemployed. While some people are seeing optimism in the number of housing starts, Dieli said the 1 million we recently saw are the trough level of every other housing slowdown.

“We still have a long way to go,” he said.

There is also some concern about the upcoming change in personnel at the Federal Reserve. On Feb. 1, Janet Yellen takes over as head of the Fed.

“Every new chair wants to put their own stamp on things,” Dieli said. In the Question and Answer session following his remarks, Dieli said that Yellin “has the training and the background for the job, but she was the second choice, which is a problem she will have to overcome."

Dieli also spoke about the impact of today’s trucks that offer increased productivity. In the 1970s, 34,300 new Class 8 units were needed to move $100 billion of TEA. In the 1980s that number was 25,300 and today it is 19,500. This means it is taking fewer and fewer vehicles to transport goods, even as the economy grows.

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