“With a third-straight quarter of growth, it’s clear America’s economy is turning around.” –U.S. Commerce Secretary Gary Locke
The number might be looking better, but do they really indicate an economy on the rebound? The question is of course immensely important to everyone (with truckers no exception), but getting a clear picture really isn’t, I’m finding.
Let’s talk raw numbers first. The U.S. Commerce Department’s Bureau of Economic Analysis recently released its first estimate of gross domestic product (GDP) growth for the first quarter of 2010. Real GDP grew 3.2% at an annual rate in the first quarter, consistent with private-sector expectations, the agency said.
In terms of trade and retail sales, again, things are looking up from a purely statistical standpoint. The Bureau of Economic Analysis noted that in March, U.S. exports increased by 3.2% to $147.9 billion from February, with imports climbing 3.1% to $188.3 billion during the same period.
“The rise in imports shows increasing consumer confidence in America's economic recovery,” noted Commerce Secretary Gary Locke (at right). “It's also heartening to see a corresponding increase in exports.”
The Commerce Department’s U.S. Census Bureau also noted that retail sales in April performed far better than expected, increasing 0.4% after jumping 2.1% in March. Doesn’t sound like much, but it’s significant when you consider that private-sector analysts expected a small decline of 0.1% in total sales in April.
“The rising trend in retail sales indicates that consumer spending continues to grow, underlining increasing confidence in the recovery,” Secretary Locke pointed out. “The gains in consumer spending are yet another indication that the outlook for sustained economic growth is improving.”
Freight is also (not surprisingly) on the upswing as a result of increased sales and trade activity. The Department of Transportation’s Bureau of Transportation Statistics arm said its Freight Transportation Services Index (Freight TSI) rose 0.9% in March from its February level – the third consecutive month the TSI increased.
It’s also worthy to note that the Freight TSI – which measures the month-to-month changes in freight shipments by ton-miles across all modes, even pipelines – is up 2.6% from March 2009, the first year-to-year increase in the freight index since July 2008, BTS said.
The agency also noted that that Freight TSI index has risen 4.5% over the last 10 months, starting in June 2009, after declining 15.3% in the previous 10 months beginning in August 2008 – increasing in eight of the last 10 months, while expanding 1.6% in the first three months of 2010 alone.
These are all good, positive figures, showing things are heading in the right direction – economically speaking, at least.
Then how to explain a growing worry among business executives that this nascent U.S. economic recovery might run off the rails – with a possible “double dip” recession looming ahead in the not-so-distant future>
That’s is what’s worrying over 84% of some 1,280 business professionals surveyed during a recent webcast hosted by consulting firm Deloitte LLP – with more than one-quarter (27%) of those polled very concerned that there may be a “double dip” recession, while more than half (58%) are somewhat concerned.
“Many of our clients are optimistic about the economic recovery but have lingering concerns. They are worried about job growth as well as continued uncertainty within the financial and governmental sectors,” said David Williams, CEO of Deloitte Financial Advisory Services LLP (Deloitte FAS).
“The economic growth we experienced at the end of 2009 and the momentum that continues today has resulted in increased optimism; however, until the job picture stabilizes and the credit markets firm up, concerns will remain,” he added.
The survey cut a wide swath across many industries, according to Deloitte – banking and securities, consumer and industrial products, energy and resources, financial services, health care providers, health sciences and government, insurance, telecommunications, manufacturing, retail, wholesale, and distribution, just to name a few – so it’s worrisome that so many think the light at the end of this dark recessionary tunnel may be further away than we think.
Nearly one-third (31%) of respondents polled by Deloitte believe that their company will not fully recover from the recession until after 2011, with only 14% confident their company would fully recover by the end of 2010.
Almost two-thirds (63%) of respondents think that some cost cutting measures their company implemented to weather the recession will be enforced during the upturn. Additionally, 19% of those polled responded that all cost cutting measures implemented during the recession would continue to be enforced during the upturn, according to Deloitte’s survey.
Add to this the shaky fiscal ground America – indeed, much of the developed “Western” world – is treading on these days and it’s easy to see why things might go from bad to worse, without even a brief stop at better along the way. Economist Robert J. Samuelson (below at left) made note of this dire predicament in one of his recent columns:
“Budget deficits and debt are the real problems, and these stem from all the welfare benefits – unemployment insurance, old-age assistance, health insurance – provided by modern governments,” he said. “Countries everywhere already have high budget deficits, aggravated by the recession, and Greece is exceptional only by degree.”
He’s referring here to the only just-avoided massive default on Greece’s national debt, forcing draconian cuts to wages, pensions, etc. “In 2009, its budget deficit was 13.6% of GDP; its debt, the accumulation of past deficits, was 115% of GDP. Comparable figures for the U.S. – calculated slightly differently – are 9.9% and 53%.”
While Samuelson said there are no hard rules as to what's excessive, financial markets – the banks and investors that buy government bonds – are obviously worried. “The welfare state's death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession,” he said.
“By allowing deficits to balloon, they risk a financial crisis as investors one day – no one knows when – doubt governments' ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates,” Samuelson stressed. “Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder.”
It’s quite an economic pickle we’re in long-term, which certainly takes a lot of bloom of the rosy numbers we’ve been seeing of late.