Editorial: Watch Out for Those Signs of Recovery

The month of March has brought plenty of signs that the U.S. economy may be well along on its recovery from the 2001 recession. But it also brought plenty of indications that recovery is no bed of roses for trucking.

For the first time in 19 months, the nation’s purchasing managers said the factory sector was expanding again during February. The Commerce Department also said that new orders for goods from U.S. factories rose in January for the second consecutive month.

Good news for trucking, without a doubt, since U.S. manufacturers generate a huge volume of cargo for trucks to carry.

However, the Energy Department also said the price of diesel fuel broke out of its recent narrow range to jump 1.9 cents a gallon, in what appears to be partly a reflection of higher demand for fuel now that economic growth is starting back up.

Gasoline rose as well, and DOE warned that growing demand and a crimped supply outlook mean gasoline prices may rise faster than normal this spring.

So the long-hoped-for good news that the contraction has ended may also mean the cost of motor fuel is destined to take a higher cut of any new freight income.

Likewise, investors and financial markets around the world waited for Federal Reserve Chairman Alan Greenspan to give his latest take on the economy. Since he heads the group that sets U.S. interest rates, his assessment says a lot about whether rates may rise, fall or hold steady.

Greenspan told the Senate Banking Committee March 7 that a recovery was “already well under way” but would probably be moderate. Immediately, markets took that to mean Fed rate hikes could be coming before long, and while stock and bond prices fell, market interest rates rose.

So the good news from the Fed brought with it the risk that another chief operating cost for trucking, interest rates, may be on the rise.

Despite recovery, the U.S. steel industry remains troubled, with many companies bankrupt. President Bush tried to give them time to revive with temporary tariffs on cheap steel imports.

That can raise the cost of steel products, including trucks and engines, while shifting steel hauls away from ports and toward domestic mills.

And despite recovery, continued tightness in insurance markets helped cause another trucking company, Umthun, to close.

Recovery is good for trucking overall. It means a growing economy, more freight to carry. But it also means new cost pressures while some companies struggle for survival.

So as we see those recovery signs, get ready. The ride will remain bumpy for a while.

This story appeared in the March 11 print edition of Transport Topics. Subscribe today.

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