Editorial: Economic Recovery Has Not Yet Arrived

Yes, there is some good news: Interest rates have fallen again, and diesel and gasoline prices are consistently coming back down after sharp spikes earlier this year. Even the factory and construction sectors show new strength.

But it is too early to start celebrating a recovery for the trucking industry. The falling interest and fuel costs, plus the bounce in key customer segments, hint that fundamental business conditions may have finally turned the corner, and that’s certainly welcome.

But seeing a glimmer of light at the end of a long tunnel is not the same as getting back into daylight. The worst may be over, but good times won’t be here for a while.

So far, the news from most freight haulers is that their business remains weak. The latest news elsewhere on these pages reflects that.

FedEx Corp. said it is trimming its overnight-delivery Express unit’s workforce by 5% through attrition, as many of its shippers continue to report bad conditions. FedEx handles a lot of freight for high-technology companies, and many of them continue to slash production and jobs.

Less-than-truckload giant Roadway Corp. reported second-quarter profits 59% below a year ago, as the slow economy cut revenue faster than expenses. Company officials were somewhat hopeful the last half of 2001 will be better, and said demand has stabilized — but noted that for now, business is still bumping along the bottom.

ome LTL carriers have now cut all they can and have had to start hiking freight rates, despite the economic slowdown. Meanwhile, in trucking and related industries, marginal companies are still falling by the wayside.

When the Federal Reserve cut interest rates by just a quarter-point on June 27, after five earlier half-point cuts this year, it slowed its economic stimulus strategy. The Fed may cut rates further in months to come, but its big moves to get the economy moving again are probably over.

The fuel price declines over the past month or so have also been helpful, but do not erase the damage already done.

Fed Chairman Alan Greenspan, in a speech the day after the Fed’s last rate cut, warned that big spikes in energy prices can make a big dent in the cash flow and capital spending of many companies.

Many trucking firms and manufacturers know that lesson all too well. They are still suffering from the hit they took on fuel costs as well as the slump in demand from their customers.

Those effects will take more time to work through. Recovery is not here yet.

This story appeats in the July 9 print edition of Transport Topics. Subscribe today.