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GDP to boost trucking

July 28, 2006
The U.S. economy slowed sharply from the white-hot growth rate recorded in the second quarter, but the stage is set for solid but moderating growth for trucking companies in the second half of the year

The U.S. economy slowed sharply from the white-hot growth rate recorded in the second quarter, but the stage is set for solid but moderating growth for trucking companies in the second half of the year.

The gross domestic product (GDP) increased at a seasonally adjusted annual rate of 2.5%, compared with 5.6% in the first quarter. Much of the moderating growth can be traced to unsustainable growth in the first quarter. But what’s promising about the 2Q GDP report is that after aggressive, unsustainable 1Q growth, key components of the economy either continued to grow moderately or dipped only slightly.

For example sales of durable goods, which are consumer products meant to last for several years, sales slumped a modest 0.5% in the 2Q after rocketing 19.8% in the 1Q. In 2005, durable goods accounted for roughly 8% of the overall economy.

“You had durable goods growing at 19.8% due to auto sales driven by financing and incentives,” Chris Brady, president of Commercial Motor Vehicle Consulting told FleetOwner. “You’d expect a larger decline [in the second quarter]. That bodes well for household balance sheets and what they can support in consumer spending.”

Business investments in equipment and software, which accounted for about 7% of the overall economy in 2005, grew 15.6% in the first quarter but slumped 1% in the second quarter.

“The 1% decline [in capital expenditures] is surprising because business have been strong,” Brady said. “Maybe high energy prices have been hurting non-oil companies. That’s something to monitor.”

Exports, which made up about 10% of the economy in 2005, jumped 14% in the first quarter and moderated to see 3.3% growth in the second.

Business inventories expanded $52.6 billion as retailers, distributors and manufacturers tried to build up their stocks to acceptable levels in the face of strong demand.

“The fact that durable goods only declined 0.5% implies household balance sheets are still in good shape to support moderate growth,” Brady said. “Even with high energy prices and rising interest rates you didn’t see a large falloff in consumption of durable goods. That means the pull on the supply chain will continue to expand and that will generate freight volumes.”

To comment on this article, write to Terrence Nguyen at [email protected]

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Terrence Nguyen

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