Economic uncertainty continues to rule the day
October 24, 2011
In a recent interview with Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast, I was told that “that the only true options for the economy at this point are stumbling forward or falling down.” While Leamer may have said that in jest, his words ring true—unfortunately.
He made several points supporting his case, including: sluggish GDP growth, cautious consumer buying behavior, and a moderate slowdown on the manufacturing and industrial production side to name a few.
The news regarding a tepid economic recovery is clearly far from new, we have been reading about it and experiencing it in one way or another for a while now. We have been told that things will be better “soon” on more than one occasion, yet things continue to stagnate.
This less than uplifting theme (it is Monday; I apologize) was driven in part by an article I read in this morning’s Wall Street Journal, entitled “Lean Companies Ready to Cut.” Not the most inspiring headline in this era of economic uncertainty by a long shot, I know.
Without re-writing the entire article in this space, here is a quick summary of what it discussed:
-many manufacturers are setting aside money to fund moves aimed at cutting costs and streamlining operations;
-these cuts could be comprised of things like job cuts and factory closures, with slow revenue growth expected in 2012; and
-hiring growth remains anemic
OK-not exactly a ringing endorsement for the economy. What’s more, Jeff Sprague, managing partner at independent research firm Vertical Research Partners, said this:
“The consumer is dead, construction is dead, so if the industrial sector pulls back, then we don’t have too much else to lean on. At the margin it certainly is worrisome. It could feed on itself.”
Sprague did add that corporate plans regarding cost-cutting need to be viewed with a caveat, that being not being caught flat-footed should things take a more serious turn for the worse.
As per the usual, the mixed signals regarding the economy are plentiful. We have seen them go up and down more times than can be remembered over the last four years or so. And now that we are in third-quarter earnings season, there have been some signs that freight transportation carriers and logistics services provider are off to a good start on that front. Look no further than J.B. Hunt, CSX, KCS, and Union Pacific, to name a few on the intermodal and rail side.
But as more companies report in the coming weeks it will help to provide a clearer picture of what is happening—and what can possibly be expected—in the future. Given the up and down nature of the economy, though, don’t take it as gospel, though, because we all know just how quickly things can change.
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