Trucks at Work Blog

“If you want the rainbow, you have to put up with the rain.” –Comedian Steven Wright

Despite a truly knockout employment report last month, many clouds still darken the U.S. economy’s horizon – and that of the world’s as well.

This uncertainty is in no small measure being largely driven by the European sovereign debt crisis (a situation I am sure everyone is VERY tired of hearing and talking about) but other concerns are also in play – a big one being a sharp uptick in U.S. state and local taxes, combined with what’s become a long slow decline in real incomes, reducing consumer spending.

Those issues, in turns, are making corporate CEOs less sanguine about future prospects – and if they (and thus their companies) begin hunkering down, freight volumes might start dropping as well. more

“Unlike traditional utilities, roads and bridges have no rate payers to fall back on. Politicians and the public seem to attach a low priority to fixing aging transportation infrastructure and this translates into a lack of support for raising fuel taxes or imposing tolls.” –C. Kenneth Orski, noted public policy consultant and 30-year veteran transportation expert

Ken Orski (at right) is no stranger to this space. Indeed, Orski – who served as associate administrator of the Urban Mass Transportation Administration under Presidents Richard Nixon and Gerald Ford and now publishes a transportation newsletter – has forgotten more about transportation and infrastructure needs than most folks know.

He recently penned an interesting column for Public Works Financing, noting that U.S. infrastructure needs – from water and sewer systems to roadways and bridges – are floundering in a sea of ignorance.

Indeed, a column written in the Washington Post by Charles Lane last year – and the writers who vigorously responded to him – puts in sharp relief the attitude of most Americans when it comes to the state of our roadways and bridges: they seem to look OK, so why do we need to spend money on them? more

“The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated.” –from the International Monetary Fund’s World Economic Outlook update this month

“Optimism among U.S. industrial manufacturers regarding the prospects for the U.S. economy over the next 12 months rose to 30% in the fourth quarter of 2011 – up from only 5% in the third quarter of 2011.” –from PricewaterhouseCoopers’ fourth quarter Manufacturing Barometer survey

For truckers trying to read the economic tea leaves to figure out what direction freight volumes might be headed in, there isn’t much clarity to be found of late.

For example, take the quotes above – one from the latest World Economic Outlook update compiled by the International Monetary Fund (IMF) and the other gleaned from a quarterly survey of manufacturers conducted by global consulting firm PricewaterhouseCoopers (PwC).

They only scratch the surface of the iceberg in terms of uncertainty plaguing the global economy right now, as portents of doom are being issued right alongside a sudden surge in confidence about the business opportunities ahead.

The gloom of course derives from the still precarious sovereign debt situation in Europe; a region of the world the IMF now believes is headed for a recession this year. The international entity slashed its economic growth outlook for the “Euro zone” this month, predicting a drop in economic output of 0.5% for the region in 2012 – a decline of 1.6% from its outlook last year – and only meager growth of 0.8% in 2013, a decline of 0.7% from previous estimates. more

“CFOs are worried about the spillover effect from the European [sovereign debt] situation into global consumer and capital markets. They appear to believe that the longer we continue without effective solutions, the more likely and more pronounced the collateral effects will be on other established and emerging economies around the globe.” –Sanford Cockrell III, national managing partner for the CFO program at global consulting firm Deloitte LLP

Truckers are well aware of how “spillover,” as characterized by Deloitte’s Sanford “Sandy” Cockrell (seen at right) in the quote above, can impact the freight business.

I mean, just take the effort to reduce truck exhaust pollution over the last decade for example. Fleets were so concerned about the cost and reliability of 2007 emission-compliant trucks that it sparked a tremendous surge in new truck sales ahead of the compliance date, despite a nose dive in freight volumes – the first of many warnings about the impending arrival of the “Great Recession.”

As a result, record levels of North American Class 8 factory shipments in 2006 and 2007 – some 371,916 and 201,278 brand new units, respectively – plummeted to only 119,714 by 2009, according to data tracked by FTR Associates. And the impact of that artificial spike lived on for years; indeed, it’s created used truck inventory issues that will remain in force well into 2014.

So when CFOs across a range of businesses start worrying about how the negative “spillover” from Europe’s sovereign debt crisis might hammer the global economy – and thus the freight volumes associated with economic activity – it warrants the attention of truckers on this side of the pond. more

“This is not the opinion of pundits or economists; these are the CEOs who are leading our economic recovery and will be responsible for improving the business and employment picture in the U.S. over the next three years. This is a good sign of better days ahead.” –Rafael Pastor, chairman and CEO of Vistage International concerning the increasingly optimistic outlook of executives polled in the firm’s quarterly “confidence” survey.

Make no mistake – times are still tough out there and, as the old saying goes, we ain’t out of the woods yet; not by a long shot.

Still, it’s good to see a sudden surge in corporate optimism of late, despite all the troubles posed by everything from Europe’s sovereign debt-crisis to Iran’s saber-rattling in the Straits of Hormuz as that nation threatens to close that vital oil shipment channel in the face of international sanctions over its nuclear program.

Indeed, folks across the business spectrum seem to be taking one of Winston Churchill’s famous maxims to heart: “A pessimist sees difficulty in every opportunity, but an optimist sees the opportunity in every difficulty.”

One piece of positive news on the economic front comes from the Vistage CEO Confidence Index, which shot up to 98.8 in the fourth quarter last year after precipitous declines during the prior two quarters.

This index, by the way, reflects responses from 1,641 U.S. chief executives, who were polled between Dec. 12 and Dec. 22 last year (which ain’t all that long ago, by the way). more

“For U.S. automakers and suppliers, the past year can best be described as 12 months of mixed results, leaving unanswered questions about the future direction of the industry and what is required for manufacturers and suppliers to thrive.” –Scott Corwin, partner, Booz & Co.

The automotive industry generates a lot of freight for the trucking industry in a host of different ways, from raw materials and components headed to assembly plants to parts for dealer and store shelves, not to mention of course the gleaming, finished cars and trucks headed to the showroom floors of dealerships across the U.S.

With all of that in mind, how’s the automotive industry shaping up for 2012? And does trucking stand to benefit?

Global consulting firm Booz & Co. recently compiled an “outlook brief” to help provide some insight into these (and other) questions concerning the automotive industry; an outlook that seems to discern some pretty good trends, which – if they become reality – will no doubt boost freight demand from this sector of the U.S. economy.

Booz & Co. partners Scott Corwin, Evan Hirsh, Jan Miecznikowski, and Brian Collie – along with Mike Beck, the firm’s senior executive adviser, and Senior Associate Patrick Mulcahy – noted that U.S. light car and truck sales should exceed 12.5 million at the close of 2011; a number they characterize as “a nice bump up” from 11.6 million in 2010 and 10.4 million in 2009.

Yet those figures are what the group calls “a far cry” from the 17.3 million units worth of annual sales witnessed in 2000 – indeed, even the most overly optimistic analysts forecast that U.S. vehicle sales will rise to no more than 14 million units in 2012. more

“This somewhat positive outlook for the domestic [U.S.] economy is at odds with a global economy that appears to be losing steam. In particular, a deeper-than-expected recession in Europe could easily derail the outlook for the U.S. economy.” –Ken Goldstein, an economist with The Conference Board

The economic picture – both for the U.S. and the world – remains unfortunately no clearer now than in weeks past, despite the addition of new data (some of it quite positive, truth be told).

Of course, that doesn’t leave freight carriers with an awful lot to go on as they make final tweaks to their strategies for 2012 as 2011 draws to a close. Then again, is anyone in the trucking community really surprised by the heavy amount of uncertainty clouding everyone’s crystal balls of late?

First, some news on the positive side of the ledger: The Conference Board reports that its “leading economic index” or LEI metric for the U.S. increased 0.5% in November, which followed a 0.9% increase in October and a 0.1% increase in September.

Not ticker-tape-parade numbers, by any means, but three months of steady, positive upticks in the group’s LEI is a good sign for the U.S. economy, noted Ataman Ozyildirim, one of them many economists at The Conference Board.

“November’s increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded,” he explained. more

“The problematic combination of private-sector deleveraging, public-sector austerity and the lack of confidence in political leaders’ ability to navigate these choppy waters will continue to plague the U.S. and Europe … [but] the U.S. economy can be expected to muddle through.” –Nariman Behravesh, chief economist for consulting firm IHS Global

It’s been a long, exhilarating, frustrating and often strange year and now, as the last days of December start to drift away, we start trying to figure out what 2012 will be like.

Can we top 2011 for sheer historical importance? I truly doubt it, for by the close of 2011, Osama Bin Laden lay dead at the hands of U.S. Navy SEALs (may their names be praised), decades-long regimes in Tunisia, Egypt, and Libya stood overthrown (with erstwhile dictator and terrorism supporter Col. Moammar Gadhafi killed in Libya’s nearly year-long civil war) and Syria’s dictatorship left hanging by ever slimmer threads at year’s end.

Even North Korea’s notorious dictator Kim Jong-Il finally got placed on the ash heap of history after dying of an apparent heart attack, leaving the Korean peninsula unsure of what the future holds in store for the people of both North and South.

U.S. armed forces finally left Iraq after a long often nightmarish eight and half year struggle, while a different struggle back home over the future of federal spending and taxation efforts grew ever more contentious and at times insurmountable.

The biggest unknown as we stand here awaiting 2012 concerns the future fiscal direction of what were once the economic titans of the world – the U.S. and Europe – as concerns over sovereign debt, unemployment levels, and fears of recession darkened their respective crystal balls. more

“While the headwinds remain strong going into 2012, there are indications the economy and the housing market are gaining ground, albeit slowly. All told, though, next year will be another bumpy ride.” –Frank Nothaft, vice president and chief economist, Freddie Mac

While there’s no doubt been a spate of good economic news of late, chronicled adeptly by my esteemed colleague David Cullen last week, the outlook for 2012 still remains cloudy at best due to a variety of factors – meaning that freight carriers will need to stay on their toes as the New Year approaches.

“There is a great deal of uncertainty right now,” noted Matthew Sottong, surveys director for BNA, a wholly-owned subsidiary of Bloomberg L.P.

“Poor economic performance, not only in the U.S but also abroad, gridlock on Capitol Hill and the run-up to a Presidential election where the outcome is very much in doubt … all of those factors lead to timidity on the part of business to expand and hire new people,” he explained. “Until some of those factors are resolved, we are very likely to continue to see flat or slowing job growth in all business sectors.”

Sottong derived this rather gloomy forecast from BNA’s latest quarterly employment survey of 384 companies, which discerned that after an initial pickup in hiring projections from the fourth quarter of 2010 to the first quarter of 2011, employer hiring plans remained largely flat for the bulk of 2011 and are showing some indications of slowing in the first quarter of 2012. more

“It’s a positive sign for the travel industry that so many Americans are planning to travel this holiday season, collectively contributing to the second-highest year-end holiday travel volume in the past ten years.” –Bill Sutherland, vice president, AAA Travel Services, referring to the organization’s prediction that 91.9 million Americans will travel 50 miles or more from home during the 2011-2012 holiday season

There are of course two ways to view AAA’s travel forecast for the 2011-2012 holiday season – which the group says runs from Friday, December 23, 2011, to Monday, January 2, 2012.

One is reflected in Bill Sutherland’s quote above; the other can be gauged from the collective groan truckers from coast to coast will emit upon hearing that 91.9 million Americans are predicted to travel 50 miles or more from home during the year-end holiday season – a 1.4% increase over the 90.7 million people who traveled during this time period one year ago.

AAA noted, by the way, that this year’s predicted holiday travel volume is the second highest in the past decade and represents 30% of the total U.S. population. And if those statistics don’t make truck drivers cringe, I don’t know what will, for as we all know a lot of freight still needs to be moved during the holidays and so truckers will need to wade through all that holiday time travel to deliver it. more