Economic malaise continues
July 27, 2012
June retail sales and the ISM Manufacturing Report on Business—two pretty decent economic indicators—both put up their lowest numbers from 2009. Not good. Consumer Confidence in July fell to its lowest number in 2012 year-to-date. Again, not good. The advance estimate of second quarter GDP from the Department of Commerce checked in at 1.5 percent. This is especially really not good.
See where I am going here?
Oh, yeah, UPS also lowered its 2012 guidance for the rest of the year, due to what its CEO Scott Davis call a “looming fiscal cliff.”
I wish I was making this stuff up, but, once again, the economy is top of mind and not in a positive way either. But it is what we are up against and really have been up against for literally years now. Seriously, when was the last time any of us were feeling really “jazzed” about the economy? It feels like a long, long time at this point.
Looking at GDP data, it is pretty clear what is happening. Consumers are uneasy about making non-essential purchases—and with good reason.
According to Commerce, personal consumption expenditures (PCE) were front and center for the deceleration in real GDP from the first quarter to the second quarter. And it added that the price index for gross domestic purchases, which measures prices paid by U.S. residents, was up 0.7 percent from the first quarter to the second quarter.
Other contributors to the decline included an acceleration in imports, decelerations in residential fixed investment, a smaller decrease in federal government spending and an acceleration in imports.
Long story short, the economy is stuck in neutral and we all know it. While many freight transportation companies have posted solid numbers, one needs to know (and I am sure you do) that this is far more of a reflection of pricing power and accessorial charges than meaningful annual gains in volumes, which are largely flat in most cases regardless of mode.
I know it is getting old saying this, but things on the economic front—aside from GDP, that is—like jobs numbers and housing, for example, are still not where they need to be to serve as a signal that the fog of economic malaise has lifted. It won’t happen today and probably not tomorrow either. But one day it will and that will be when the healing of recent years will truly begin.
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