Editorial: Waiting for the Economic Recovery

Where is the long-expected economic recovery that the trucking industry keeps hoping for?

A year ago, as fuel prices surged, factory shipments were already weakening and truckers were starting to ask, “Where did all the freight go?” Yet many private observers and economic policymakers said not to worry. The U.S. should avoid any major slowdown, they said, especially if fuel prices stabilized.

By last winter, what trucking had witnessed finally became clear to everyone. The slump was spreading fast throughout the whole economy. Between weaker demand and soaring energy costs, many businesses would have to sharply cut back or fold up shop.

But then the Federal Reserve started cutting interest rates, and the happy-talk camp said the economy should enjoy a “soft landing,” that solid growth could resume by late spring or midyear.

Still, the recovery kept missing its deadlines. Every month brought more bad news of falling industrial production, slow growth in retail sales, more companies cutting output and jobs, heavy truck sales declining further.

Last week’s news that industrial production fell just slightly in July was hailed as a sign that the worst may finally be over. The bottom may have been reached at last.

Perhaps, but let’s not celebrate too soon. The trend of economic indicators over the past year leaves plenty of room for skepticism.

nd consider the following news that also emerged last week: The trucking industry suffered another casualty, when chemical hauler Matlack Systems said it would liquidate after unsuccessfully trying a bankruptcy reorganization. Patriot Transportation said the poor economy was a factor in driving it out of the third-party freight-handling business, although it will keep its trucking units. Heavy-truck maker Navistar International reported a 98% drop in profits in its latest quarter, and said it expects the truck market to remain weak another six to 12 months.

The recent downdraft in diesel and gasoline prices has helped some, but the best news on fuel prices may be over. This week’s expected cut in interest rates by the Fed should help matters, but how much and when are unclear. Those tax refund checks can give a mild boost to consumer spending, and then to factory orders and truck shipments, but an offsetting trend already seen is weakness in back-to-school sales.

So it may be a while before we can be sure if the U.S. economic slump has really bottomed out. We hope for a smooth and solid recovery soon.

We don’t see it yet.

This article appears in the Aug. 20 print edition of Transport Topics. Subscribe today.

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