The Conference Board believes that Hurricanes Rita and Katrina will amplify the pre-Katrina trend of slower economic growth until the second half of 2006. The energy price spikes that followed the storms are expected to crimp retail sales, putting holiday sales at risk, the non-profit organization said.
“Faced with higher energy prices, higher interest rates, and slower job growth over the next few months, consumers’ willingness and ability to spend will be severely tested,” stated The Conference Board. “If consumers curb their spending, it could spell major trouble for retailers in the rapidly approaching holiday season.”
The economy could slow to a growth rate of less than 2% for at least one quarter.
But The Conference Board does forecast energy prices to decline from the post-hurricane spikes. Additionally, massive rebuilding efforts will add jobs and stimulate the economy as early as the first quarter of 2006.
“Oil prices will likely stay in the range of $60 to $65 per barrel for the rest of 2005, and then ease to about $55 during the first half of 2006,” stated The Conference Board. “So far, the Federal government has authorized three times more aid for Katrina than for the 9/11 terrorist attacks.”
According to the most recent quarterly earnings reports, motor carriers say they are also feeling the negative impact of energy spikes. However, freight tonnage appeared to remain strong.
“Like third-quarter 2004, this quarter was punctuated with significant one-time events, most notably hurricanes Katrina and Rita,” said Kirk Thompson, CEO of J.B. Hunt Transportation Services. “Paid deadhead and the number of loads moving under spot quotes increased significantly from earlier in the year, which indicates that capacity availability in the truckload market remains extremely fragile. Current spot activity in October remains at third-quarter levels indicating continued tightness in the market.”
Landstar System reported that its third-quarter earnings have already benefited significantly via services related to the hurricanes.
“Included in the 2005 third-quarter revenue was $129.8 million of revenue related to disaster relief efforts (nearly 20% of total revenue) for the various hurricanes that impacted the United States during the quarter,” stated Landstar. “These emergency transportation services were provided primarily under a contract between Landstar Express America, Inc. and the United States Department of Transportation/Federal Aviation Administration.”
Celadon Group said Friday that it expects earnings to be better than Wall Street expectations.
To view the archive of FleetOwner’s ongoing hurricane news coverage, go to www.fleetowner.com/katrina.