“Worst Economy in a Generation,” Says Economist

[HardTimeTrucker]

“Worst Economy in a Generation,” Says Economist


Trucking especially hard hit, not likely to lead recovery

Economic recovery will occur when consumer spending turns around, unemployment bottoms out and the business inventory-to-sales ratio improves, but that will take awhile, according to the chief economist of the American Trucking Associations.

"This is the worst economy in a generation," Robert Costello told the Los Angeles Transportation Club on Tuesday.

Trucking has been hit especially hard in this recession, with the number of truckloads down more than 20 percent year over year.

Although motor carrier failures have not been as great as economists might anticipate given the depth of the recession, Costello said he is concerned that another spike in diesel prices could be too much for some trucking companies to bear.

In past recessions, trucking was a leading indicator, preceding the official end of the economic downturn by as much as 10 months. This time, however, the business inventory-to-sales ratio is so bad that trucking will not lead the economy out of recession.

Businesses have actually done a good job in keeping a lid on inventories, but sales are depressed and growth in truckloads may track the recovery but won't precede it.

Consumer spending, which accounts for about two-thirds of the nation's economic activity, must pick up for the trucking industry's fortunes to improve. That will happen, but the recovery period will be longer than in past recessions.

Consumer spending is affected by the employment picture, and since this recession began in late 2007, some 5.7 million jobs have been lost. Also, household net worth, which has taken a dive of 25 percent over the last two and one-half years, must also improve.

On a somewhat positive note, the drop in home values, which has been especially steep in states such as California and Florida, is probably reaching a bottom, Costello said.

Truck sales are likewise depressed, partly because trucks are not being driven as much. About 5 percent of the truck fleet is parked, which extends the life of those vehicles, and the trucks in service are not being driven as much because of the down economy.

A shift of some market share from trucking to intermodal rail took place since oil prices surged last year, but that movement has probably played out and market shares among the transportation modes will remain stable, Costello said.

Although gross domestic product will be negative this year, a pick up of less than two percent should occur in 2010, and that will start the economic recovery. When the recovery picks up steam, cargo interests should anticipate that truck capacity will tighten considerably and the driver shortages of yesterday will return.

Trying to sound upbeat, Costello said the long-term outlook for all modes of transportation to 2020 "looks good."

Contact Bill Mongelluzzo at [e-mail].