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Banging the drum for economic improvement

By Jeff Berman, Group News Editor
June 23, 2014

With the economy ostensibly in a state of perpetual flux, at least since 2007 anyhow, we have seen many lows and some high points along the way and in between.

That said, at the near mid-point of 2014, it remains difficult at times to see where things currently stand on the economic front. As we have reported in this space before, the reasons vary. Here are some of them:
-jobs data, while suggesting improvement of late, is misleading, due to the number of people no longer actively looking for work or out of work for long time;
-retail sales, while showing growth, are basically showing minimal sequential growth;
-manufacturing and industrial production are both pretty solid and that is being reflected in different freight transportation volume commodities and in different modes, too; and
-housing data showing improvement, with May resales up 4.9 percent annually in May to 4.89 million units, according to the National Association of Realtors.

On top of these points, of course, was the barebones 1.0 percent GDP figure for the first quarter, which was clearly impacted by a winter for the ages, which for many of us here n the northeast was simply brutal (it is sunny and in the 70s in southern Maine today).

Circling back to how these things factor into the current state of affairs in the freight transportation and logistics sectors, I talked to FTR President Eric Starks about how things are shaking out at the moment.

As reported in last week’s LM online story about FTR’s Shipper Conditions Index, Starks said that things are interesting in that they continue to be strong in a sense that capacity is relatively tight but not critical in any way, while rate pressure on the truckload side remains intact.

But he noted that there is a caveat with some of the issues shippers were dealing with earlier in the year, notably the harsh winter weather, have abated.

“The winter created a huge capacity crunch as shippers were scrambling to find equipment,” he explained. “That is over now, buy the driver shortage situation remains an issue and is a major problem that carriers really cannot stress enough. We are kind of at an odd spot right now, because it really won’t take much of an economic pick up to push us back to that critical spot again where we were last winter. If we start seeing the economy heating up at all, it could create some problems as things are already on the edge.”

And that is where things could really get interesting.

Starks explained that FTR is expecting a third quarter GDP around 3.3 percent, which he admitted could be overly optimistic as things presently look like that figure is more likely to be in the 2-to-2.5 percent range for a while.

“In a way, it is like being stuck in the mud,” he said. “But in a sense it is not all bad because of other things like the manufacturing sector that is seeing 4-to-4.5 percent growth right now. That is a really good number, and if manufacturing is moving then all of transportation is moving. We have a bit of a de-linkage, though, because the manufacturing economy is not mirroring the overall economy and we are at a point in time where there is usually at least better or more direct linkage. It is still not there yet and has been completely different since the recession.”

Starks’ comments on manufacturing’s strength reminded me of a column I wrote in this space in October 2010, entitled “Say hello to the manufacturing-led economy.”

In that column, I cited how he said “conditions for trucking are positive in spite of sluggish growth in the overall economy because manufacturing, which generates freight, is growing much more rapidly than services.”

And I concluded the column with this: With unemployment high and consumers still wary of spending at previous levels, it looks like the manufacturing-led recovery could be here to stay, it seems. What is your take?”

So, nearly four years later, manufacturing remains strong and is impacting freight volumes for certain. What happens next is anyone’s guess, but if we see GDP growth on a steady basis, it will be worth it at the end of the day for everybody.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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