An economic holding pattern
April 29, 2011 - LM Editorial
Not surprisingly, there are some mainstream media reports popping up lately about how high fuel costs are impacting freight transportation and logistics and spurring intermodal usage, too.
These stories are, as expected, being paired with a slew of recent reports based on government data telling us that GDP growth projections are being scaled down and that while consumer spending has the semblance of being on the rise, it is a byproduct of higher fuel prices forcing you and I to spend more at the pump for gas and more at the supermarket for food.
It all makes sense how theses things are connected. That is not surprising. What is somewhat surprising is how many people are still telling themselves how good things are despite the obvious warning signs and factors that are in play at the moment.
This was made clear in first quarter earnings announcements by many companies you read about on this Web site and in the pages of LM. While many companies reported very strong earnings performance based on strong demand and pricing, they were also quick to point out that higher fuel prices are definitely increasing the costs of doing business.
It only makes sense that this is the case, but it makes me—and all of us, really—wonder where exactly does the bottom drop out? It is not my intention to be full of doom and gloom about this stuff, but the growth we saw and were feeling good about a year ago has dissipated to a degree for sure.
That makes sense when we consider the significant inventory re-build that was occurring at that point. But now that inventories are replenished and being carefully monitored by shippers, things are certainly back to or closer to normal (whatever “normal” is these days).
Take the fuel situation and add still-high unemployment, stagnant wage increases and flat consumer confidence, it adds up to another round of belt-tightening that could impact freight trends going forward.
On a more positive note, manufacturing is going strong and freight transportation and logistics service providers have certainly benefited from that. Thinking about how things would look without this occurring is what is really grim.
Even though things appear to be in a bit of a holding pattern, there is optimism in the market place when it comes to gauging future growth. On the earnings calls, many executives pointed to the still-positive, yet gradual, trends occurring on a macro-economic level.
Here’s to hoping their optimism is pointing to continued growth, however slow it may be.
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