Supply Chain Managers Confront Mixed Economic Forecast

According to IHS Chief Economist Nariman Behravesh, “the glass is more than half full…or soon will be."

By ·

According to IHS Chief Economist Nariman Behravesh, “the glass is more than half full…or soon will be.”

First, the bad news.

Because of multiple headwinds, it has been difficult for the US economy to gain momentum and grow at rates that are more typical for the fifth year of a recovery. The government spending sequester (now expected to last at least through the end of the year) will hurt growth through the fourth quarter. A protracted recession in the Eurozone and weaker growth in emerging markets mean that there are no lifelines for the United States from the rest of the world. This is hurting manufacturing and prompting businesses to remain ultra-cautious about hiring and capital spending.

Now the good news.

The underlying growth rate in the economy is stronger than the headline numbers suggest. The January tax hikes and the subsequent spending cuts have reduced GDP growth by approximately 1 percentage point. As the impact of this fiscal tightening dissipates, growth will rebound—likely by late this year or early next year. While the robust (3.4%) first-quarter growth rate of consumer spending is unsustainable, US households will be able to maintain spending growth of 2.0–2.5% this year and next.

Family finances are becoming much more healthy, payroll jobs growth is running at a solid pace of 150,000–200,000 net new jobs each month, credit conditions are easing, and consumer sentiment is at the highest level since July 2007. Thus, the consumer will provide a solid foundation for growth. On top of that, residential investment will probably grow at a 15–20% annual rate and nonresidential fixed investment will increase at a 4–7% rate (mostly driven by business spending on equipment). All this adds up to growth in the 3.0–3.5% range for most of 2014—once the headwinds from fiscal austerity and weak global growth diminish.


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
Supply Chain Visibility: Illuminating the Path to Responsive, Agile Operations
Supply chain visibility is not an end, but a tool. It is the means to achieving true supply chain effectiveness, agility and ultimately, corporate profitability.
Download Today!
From the December 2017 Logistics Management Magazine Issue
Trade and transport analysts see rates rising across all modes in accordance with continued expansion of domestic and international markets. Economists, meanwhile, say shippers can expect revenue growth in transport verticals to remain in the 3%-plus range.
2018 Customs & Regulations Update:10 observations on the “digital trade transformation”
Moore on Pricing: Freight settlement and your TMS
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2018 Rate Forecast
Join our panel of top oil and transportation analysts for an exclusive look at where rates are headed and the issues driving those rate increases over the coming year.
Register Today!
EDITORS' PICKS
2018 Rate Outlook: Economic Expansion, Pushing Rates Skyward
Trade and transport analysts see rates rising across all modes in accordance with continued...
Building the NextGen Supply Chain: Keeping pace with the digital economy
Peerless Media’s 2017 Virtual Summit shows how creating a data-rich ecosystem can eliminate...

2017 NASSTRAC Shipper of the Year: Mallinckrodt; Mastering and managing complexity
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...