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Not much to be merry about when it comes to the economy

By Jeff Berman, Group News Editor
December 07, 2012

At this time of year, everyone likes to bask in the holiday season and take stock of all the things in life we are grateful for and fortunate to have. Unfortunately, a resilient and thriving economy is still not on that list.

To be honest, it has not been on that list for some time now, years even. For as long as can be recalled now, we have been talking about the economy with terms like the ever ubiquitous “cautious optimism” and “green shoots,” among others. And at the end of the day, especially the present day, there remains much to be concerned about.

A few things top of mind that bring concern to the front of the class are sluggish GDP growth, even with the recently revised 2.7 percent estimate for the third quarter, up from an earlier one of 2.0 percent, a still-depressed job market, and an increasingly stagnant manufacturing sector, which was previously viewed as the top driver of economic growth not all that long ago, and has now seen declines in four of the last six months. 

Economic pain is still apparent on the freight and logistics side, too.

Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, said in the November Cass Freight Index report this week that the current level of economic malaise is more than evident in the freight transportation sector, with low demand, tight credit and capacity, soft pricing, tight inventory management practices on behalf of shippers, and, of course, the Fiscal Cliff and related uncertainty overt the short- and long-term economic outlook.

Mike Regan, president and CEO of TranzAct Technologies shared similar sentiments with LM as well.

“What we still have here is an economy that is bobbing along the bottom,” he said. “It is hard to reconcile the most recent GDP number with what is actually happening.”

Regan said that the real economic tumult is so severe that a truckload carrier recently told him he company “had already written off 2013” from a profitability perspective. And he also pointed out that Werner Enterprises announced a special cash dividend of $1.50 per common share payable Dec. 13 to stockholders of record at the close of business November 29, according to the Omaha Journal Star. The article added that the special dividend amounts to about $109 million to be paid on Werner’s 72.9 million common shares outstanding. Werner has declared special cash dividends since 2008 totaling $6.95 per common share. Werner has a regular quarterly dividend of 0.05 cents.

This, he said, is an ominous sign, as it shows that companies like Werner are betting on an increase in tax policies and taking money that should be invested into its fleet into this dividend instead of paying it out to shareholders.

“This tells you not a whole lot is changing but also that a company like Werner has little incentive to invest in its fleet,” said Regan. “With some trucking companies likely writing off 2013, it is akin to what happened in 2008 and 2009.”
With the year coming to an end, there are again more questions than answers when it comes to the economic recovery. Unfortunately, it has become an annual ritual, one that it is fair to say is less than welcome, sort of like an uninvited guest at the holiday season.

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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