Where the economy goes from here

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If you are confused and worried about the U.S. economy, yet at the same time confident it’s headed in the right direction, you’re not alone.

Indeed, despite all the economic negatives being flung about of late – the slippage in the Institute of Supply Management’s PMI metric, a rise in unemployment claims, a poorer-than-expected jobs report and the resulting drop in oil and stock prices as a result of such data – many businesses are retaining, if not actually bolstering, a sense of optimism about the nation’s economic future.

And where trucking is concerned, such optimism will be vital for fueling freight volumes– even if said volumes turn out to be meager at best.

Take the results of Vistage International’s quarterly CEO Confidence Index, for example; an index that topped 96.6 in the first quarter this year, up from 87 in fourth quarter of 2012.

Vistage said, according to its survey results, that the “underlying strength in the economy” is beginning to shift the attention of CEOs away from uncertainty about federal policies to more “traditional concerns” centered on revenue growth, controlling costs, and staffing.

That’s not say the business community isn’t mightily worried about the inability at the federal level to formulate a stable, forward-looking fiscal policy.

“The recent sequester will be a drag on economic growth, with one-in-six firms anticipating that the cutbacks in federal spending will adversely affect their own business,” the firm noted in its report.

“Importantly, few CEOs expect any resolution to the basic fiscal issues facing the country [as] eight-in-ten firms expected continued uncertainty about federal policies during the year ahead," Vistage said.

Although firms are learning how to cope with heightened uncertainty, it is always more easily handled in an expanding economy than in an economy verging on stagnation, Vistage added.

Still, over the past six months according to Vistage’s data, the proportion of CEOs that reported an improved pace of economic growth has nearly doubled. In the first quarter survey, 49% reported improved economic conditions and businesses are holding “more favorable expectations” for economic growth during the year ahead.

Among all firms, 36% anticipated continued improvements in the national economy in the first quarter, up from 26% in the fourth quarter of 2012, Vistage said.

More importantly, CEOs can be described as cautiously optimistic since their judgments about both the current economic performance and the year-ahead outlook for the economy are still below the levels recorded a year ago, the firm noted.

On the job front, though, things seem grim as non-farm payroll employment edged up just 88,000 in March, leaving the unemployment rate little changed at 7.6% according to the U.S. Bureau of Labor Statistics.

Yet Vistage found that net hiring plans, after falling in the prior three quarters, posted a solid gain among all the firms it surveyed. Among all firms, 52% planned additions to their payrolls in the first quarter, up from 45% in the prior quarter, and the highest level since last year's 57%. Just 8% of CEOs anticipated reducing their staffs during the year ahead, Vistage said.

That dovetails with the findings of a CareerBuilder survey conducted by Harris Interactive among 2,184 hiring managers and human resource professionals. That poll found that “stable hiring” is expected for the second quarter as U.S. employers continue to size up a market that is producing moderate economic growth, with 26% of employers planning to increase full-time, permanent headcount in the next three months, similar to projections for the previous two quarters.

"The U.S. job market is in a better place today, but concerns over spending cuts, wavering global economies and other factors are weighing on employers' minds," said Matt Ferguson (at right), CEO of CareerBuilder. "We expect continued stability and improvement as the year goes on. The rebound in the housing sector is having a positive influence on job creation for related industries that have been struggling."

Vistage also discerned in its survey that more firms planned to invest in new plant and equipment, with 40% planning to increase such investment in the first quarter compared to 35% in the fourth quarter of 2012. “Economic uncertainty still clouds the horizon, but the threat of disruptive economic policies has greatly diminished,” Vistage said.

Finally, two-thirds of all firms expected growth in their revenues in 2013 compared with 2012, Vistage noted, with nearly six-in-ten firms anticipating that the prices they received for their products or services would not increase during the year ahead – though profits are expected to increase by 53% of all firms.

The lack of pricing power as well as competition is telling, Vistage stressed, as one-in-four firms reported that managing costs was the biggest challenge they faced in the year ahead, with a further one-in-four said that maintaining and adding to their customer base was their biggest challenge.

Not a champagne-popping outlook by any stretch of the imagination, but not a terribly bad one either. And maybe that’s all the freight world needs in order to keep rolling along.

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Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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