Though TL tonnage increased 0.9% in March, according to data tracking by the American Trucking Assns. (ATA), the U.S. Department of Commerce reported that orders for durable goods nosedived some 5.7% that same month – just one of several indications that the U.S. economy still remains stuck in slow gear, noted Stuart Hoffman, chief economist for the PNC Financial Services Group.
“Economic growth has slowed somewhat as 2013 has progressed, with a number of drags starting to kick in,” Hoffman explained in the firm’s national economic outlook report.
“Adjusting for inflation, U.S. GDP [gross domestic product] growth in the fourth quarter of 2012 was only 0.4% at an annual rate, with big one-time drags from weak inventory accumulation and enormous cuts in defense spending,” he added.
“But the first quarter has looked much better, with real growth of close to 3.1% per annum. Consumer spending continued to expand, with gains in vehicle spending and retail sales,” Hoffman said. “Homebuilding was another positive, with business investment up with good profitability and extremely low interest rates.”
Still, Hoffman cautioned that there are indications that U.S. economic growth will be weaker in the spring quarter of 2013. “The March employment report was disappointing, with employment growth of only 88,000, [and] retail sales dropped 0.4% in March,” he said, pointing out that the Institute of Supply Management’s (ISM) key PMI index fell to 51.3 in March, down from 54.2 in February.
Yet although growth will be softer in the middle of the year, Hoffman believes the U.S. economy will continue to expand and recession is not a concern. “The underlying fundamentals of the U.S. economy are solid,” he stressed.
Bob Costello, ATA’s chief economist, echoed that positive sentiment even though the March 0.9% gain in tonnage is partially offset by a 0.6% drop back in February.
“Fitting with the expectation for solid GDP growth in the first quarter, tonnage was strong in March and the quarter overall,” he said. “At 3.9% year-over-year growth, the first quarter increase was the best since the final quarter 2011.”
[To watch video of ATA’s Costello breaking down the March tonnage numbers, click here.]
“Expect freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax returns,” Costello added. “The good news for tonnage is housing starts are growing and energy production is good – both of which generates heavy freight. However, these two sectors alone won’t be enough to keep the overall index growing at a 3.9% clip in the second quarter.”
Still, PNC’s Hoffman expects the economy with maintain its slow and steady growth pace, with gradual improvement toward the end of 2013 – adding that year-over-year real GDP growth in the fourth quarter should reach 2.3%.
“Next year will be stronger as the drag from fiscal policy fades and recovery takes hold in Europe, with growth of 2.6% from the fourth quarter of 2013 to the fourth quarter of 2014,” Hoffman noted. “Monthly job growth in 2013 will average around 180,000 and the unemployment rate will end this year at 7.3%, on its way to below 7% well before the end of 2014.”