The global economy is expected to grow next year, albeit slowly, with the U.S. projected to follow the same positive glide path – a path illuminated in part by healthy freight volumes.
However, experts warn that the threat of a recession still clouds the economic horizon due to the ongoing sovereign debt issues plaguing Europe.
“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,” noted Nariman Behravesh, chief economist for worldwide consulting firm IHS Global.
“The U.S. economy can be expected to muddle through [but], unfortunately, Europe will not be so lucky,” he added. “Meanwhile, China’s economy is slowing and there is growing anxiety about the government’s ability to engineer another soft landing.”
Behravesh predicts that if Europe only suffers through a mild recession and China does not experience a hard landing, then world growth will decelerate to 2.7% in 2012 from around 3% this year.
“On the other hand, if the recession in Europe is much deeper or the slowdown in China more pronounced, then the global economy will be headed for much weaker growth and possibly another recession,” he warned.
“The good news is that U.S. domestic risks have diminished somewhat, and growth momentum has picked up modestly,” Behravesh stressed. “Consumers seem willing to spend and businesses are more disposed to hire—albeit cautiously. This means that over the next year U.S. growth will average between 1.5 and 2%.”
In the near term, the “Eurozone” sovereign-debt crisis is the biggest threat to the U.S. economy, he pointed out.
Truck freight volumes are but one indicator lending credence to Behraveh’s forecast for the U.S. economy.
The American Trucking Assns. (ATA) reported that its for-hire truck tonnage index increased 0.3% in November after rising a revised 0.4% in October. Compared with November 2010, tonnage is up 6% – the largest year-over-year gain since a 6.5% increase back in June – while October’s index reading is 5.7% above the same month in 2010.
Year-to-date, compared with the same point in 2010, tonnage is up 5.4%, noted Bob Costello, ATA’s chief economist. “Tonnage levels continue to point to an economy that is growing, not sliding into a recession,” he noted. “Over the last three months, tonnage is up 2.3% and stands at the highest level since January of this year.”
Costello pointed to two primary factors sustaining truck tonnage in recent months. The first is that manufacturing output – which generates a significant amount of truck freight – has generally been increasing. Second, retail inventories are very lean, which is helping freight as well since retailers don’t have much excess stock and need to replenish when sales go up, he said.
The Institute for Supply Management’s (ISM) recent survey of major manufacturers highlights some of the reasons behind the continued growth in freight from this sector and why the U.S. economy remains poised for decent growth in 2012.
According to ISM’s Business Survey Committee poll, economic growth in the U.S. should continue in 2012. The manufacturing sector overall is positive about prospects in 2012 with revenues expected to increase among 17 specific industries, though the non-manufacturing sector appears slightly less positive about the year ahead, with only 15 industries expecting higher revenues.
Capital expenditures, a major driver in the U.S. economy, however, will increase only modestly in the manufacturing sector, while investment in the non-manufacturing sector will remain essentially flat.
“Manufacturing purchasing and supply executives expect to see continued growth in 2012. They are optimistic about their overall business prospects for the first half of 2012, and are even more optimistic about the second half of 2012,” noted Bradley Holcomb, chairman of ISM’s business survey committee.
“Manufacturing has demonstrated its resilience throughout this challenging economic recovery period with consistent growth dating back to August 2009 and our forecast calls for a continuation of that growth in 201,” he added, stressing that the manufacturing sector is now in its 28th consecutive month of growth.
Bradley pointed out that ISM’s survey of manufacturers revealed that their capacity to produce products and provide services will rise by 3.2% during 2012, with capital expenditures expected to increase by 0.1% from the 2011 level. Respondents also expect raw materials pricing pressures in 2012 to be less than they were in 2011, and expect their margins will improve.