FTR Conference: Expect a Freight Recovery, Just Not a Big One
While a recovery for freight and the overall U.S. economy is in the cards for the fourth quarter of the year, those attending the first sessions of the FTR Transportation Conference in Indianapolis on Wednesday were also told by experts they should not expect a huge boom.
Evan Lockridge・Former Business Contributing Editor
September 14, 2016
FTR economist Noel Perry said it would be prudent to prepare for the possibiilty of a recession.Photo: Evan Lockridge
3 min to read
Daniel Meckstroth, chief economist with the Manufacturers Alliance for Productivity and Innovation, expects a fourth-quarter spike in production. Photo: Evan Lockridge
While a recovery for freight and the overall U.S. economy is in the cards for the fourth quarter of the year, those attending the first sessions of the FTR Transportation Conference in Indianapolis on Wednesday were also told by experts they should not expect a huge boom.
Daniel Meckstroth, chief economist with the industry group the Manufacturers Alliance for Productivity and Innovation (MAPI), said that after a long while July shows “the first indication that the manufacturing inventory-to-sales ratios are falling” after higher levels hurt freight shipments earlier in the year. The July level is also the lowest in about two years.
Ad Loading...
“In the future, we are going to get a spike in production, I think is going to occur in the fourth quarter … not only in the manufacturing sector but [also] in the U.S. economy,” he said.
The reason, Meckstroth said, is that inventory cycles, such as the high one manufacturing has experienced lately, are usually short. When they are over, you typically see a spike in production.
Helping this along is the ever-resilient U.S. consumer, who accounts for about 70% of all U.S. economic activity. Meckstroth said “consumers are keeping us out of a recession.” How are they doing it? Because, as he put it, “we are in a jobs boom, with the percentage of new jobs being adding being much faster than overall economic expansion.”
“It’s new jobs creating new income…that’s what’s propelling the U.S. economy right now.”
However, there are still other problems lingering that will keep both trucking and the economy from seeing better times.
According to Meckstroth, a strong U.S. dollar is a problem, because it makes export goods produced here more expensive overseas. He also pointed to figures showing the physical volume (as opposed to dollar volume) of world trade has slowed dramatically, depressing U.S economic growth.
“If you go back 20 years before the last recession, trade was growing two to three times the rate of the global economy. Now it’s growing slower than the growth of the global economy,” he said. “We’re not seeing globalization anymore. We’re seeing deglobalization.”
Ad Loading...
In other words, expect only “modest” growth, or as he called it “the new normal” in both the economy and trucking.
FTR economist Noel Perry said it would be prudent to prepare for the possibiilty of a recession. Photo: Evan Lockridge
Even then it may not last for long, according to Noel Perry, FTR’s transportation economist.
As he explained it, the current recovery from recession is one of the longest since 1950 and it has been one of the weakest. Perry said there is a 30% to 40% probability an economic recession will hit in the next two or three years.
“You should prepare for that,” he told those listening and warned those who don’t do so at their own peril. “It’s like saying, it ain’t gonna snow tomorrow, but I know it’s gonna snow sometime in the next month, so I better get my snow blower out of the garage, put gas in it and make sure it starts. Well, I’m telling you the same thing about a recession.”
The reason he (and others) see a recession in the next two or three years is simply the growth of the overall economy has slowed.
Ad Loading...
According to Perry, if there is a recession, trucking can expect to see business decline by 5% to 6%, with rates falling about the same. For comparison, in the last recession the declines were much larger, around 15% – meaning the next recession, if it happens, will be much milder.
The trucking industry has no shortage of cybersecurity reports and cargo crime statistics. What it lacks is timely, operational intelligence that fleets can actually use.
ATRI’s latest research points to litigation, social inflation, and soaring claims costs as key drivers behind record-high liability premiums for trucking fleets. But there are things motor carriers can do.
ATA’s For-Hire Truck Tonnage Index was unchanged in April after a strong March gain, with freight volumes remaining at their highest levels since late 2022.
Transportation attorney Greg Feary breaks down the recent Supreme Court decision that brokers can be held liable for damages in truck accidents and what it means for the trucking industry going forward.
Preliminary net trailer orders rose 3% from March and jumped 126% year over year, signaling stronger-than-expected demand despite typical seasonal softness.
The unanimous SCOTUS ruling in the closely watched Montgomery v. Caribe case allows state negligence claims against freight brokers that hire unsafe motor carriers, raising new liability and vetting concerns among brokers.