More positive than negative indicators seem to be in the mix for both the overall economy and truck-based freight tonnage as the U.S. begins to climb out of the harsher-than-normal winter experienced by much of the country.
The American Trucking Assns. (ATA) reported that its for-hire truck tonnage index increased 2.8% in February after plunging an adjusted 4.5% January. However, year-to-date volume when compared with the same period in 2013 indicates that tonnage is up 2.3% overall, noted Bob Costello, ATA’s chief economist.
“It is pretty clear that winter weather had a negative impact on truck tonnage during February,” Costello said in a statement. “However, the impact wasn’t as bad as in January because of the backlog in freight due to the number of storms that hit over the January and February period.”
Costello also indicated that, in his view, the “fundamentals” for truck freight continue to “look good."
“Several other economic indicators also snapped back in February,” Costello added. “We have a hole to dig out of from such a bad January, but I feel like we are moving in the right direction again. I remain optimistic for 2014.”
Bill Witte of Witte Econometrics and the economy expert for research and forecasting firm FTR, echoed Costello’s optimism in an upbeat assessment of the U.S. economy delivered during the latest webinar in FTR's State of Freight series.
“The U.S. economy has been very consistent for the past three years,” Witte explained, noting that the U.S. economy has experienced both output increases (2.3%) and employment growth (averaging 183,000 per month) indicating a “steady but weak” trend with little quarter over quarter variation.
In addition, he pointed out that there has been a “steady decline” averaging 1% per year in unemployment “partly due to atypically slow labor-force growth,” which in his words reinforces the “stable underlying pattern” of economic activity in the U.S. buttressed by several critical growth metrics: Consumption rate increase of 2%, an uptick in investment of 6.2%, increased trade of 5.8%, and a 2.3% jump in government spending.
“I think this pattern will continue for at least a couple more quarters,” Witte added, noting that his forecast takes into account the following:
- Current business investment is down vs. the fourth quarter, but is up vs. all of 2013
- Housing starts are in the reverse position of business investment
- Government spending is seeing an “end to federal retrenchment”
- Inventories will reverse from their “accumulation” in 2013
Witte also said that “farther out, my model thinks the economy will break out to somewhat better growth.” He believes stronger business investment would be “central to this outcome,” along with these other factors:
- Housing performance: “Better than in the first half of 2014, but not seeing double-digit growth”
- Trade continuing to improve
- Government acting as “a small positive”
- Inventories “assumed to be neutral”
- Unemployment continuing to decline albeit “more slowly”
Sterne Agee chief economist Lindsey Piegza offered a more subdued outlook for the U.S. economy, noting that inflation remains “subdued” with the most recent February employment data indicating the creation of 175,000-plus jobs showed that while it is “clear” the labor market is losing momentum from the start of 2014, but it is not clear that underlying momentum in the labor market has “declined drastically.”
She also pointed out that housing starts fell 0.2% in February, dropping from 900,000 to a 907,000 on an annualized unit pace, with the three-month average declining from 1.01 million to 947,000. Year over year, starts are down 6.4% thanks to a 10.6% decline in single family starts, despite a 2.2% annualized gain in multi-unit space, Piegza said.
“[Housing] is mixed with continued weakness in starts backed by a sizable rebound in multi-family permits,” she noted. “While only a partial improvement, a positive rise in any capacity is a welcomed reprieve from last month’s across the board fallout. The tepid increase, however, suggests that while it has had a negative impact, there is more than winter weather dampening construction activity.”
Piegza believes, going forward, it will take sustainable job and income growth to propel would-be homebuyers back into the market. “But with the labor market uneven at best, it may take some time before the housing industry regains the momentum seen earlier last year,” she stressed.