The transportation sector is stagnant. Recent metrics of trucking volumes, such as the American Trucking Association’s monthly Truck Tonnage Index, and Internet Truckstop’s weekly Market Demand Index (which I personally report), have been flat for several weeks to months.
Partly, these mediocre trucking volumes reflect a broader lethargic economy. Second quarter GDP and personal consumption expenditures grew at a meager 1.5%. And, the near-term outlook is far from rosy. The nonpartisan U.S. Congressional Budget Office released GDP forecasts this week that, under some (unlikely) scenarios, see the economy re-enter recession during 2013 (the CBO’s more plausible expectation is for a continued slow pace of economic growth).
There is some semblance of a silver lining: construction activity is improving, as I noted in my previous post, and factory output has been slowly but steadily increasing. However, there is also a lot of broader economic uncertainty. Whereas economic indicators for the second quarter of 2012 were poor, reflecting a pattern of faltering growth, metrics released so far for July and August show potential for a somewhat more upbeat economy during the second half of this year.
In particular, July Retail Sales improved by 0.8%, breaking a three-month trend of declining sales volumes. Industrial Production increased by 0.6%, another noteworthy gain. The Reuters/University of Michigan Consumer Sentiment Index (preliminary) value for August shows a substantial improvement of consumer confidence. And, more residential building permits were issued in July than in any month during the past four years (building permits serve as a good leading indicator of future construction activity, which is a major component of demand for trucking).
It remains to be seen whether these more positive indicators will translate into improved trucking volumes and help break the industry out of its current flat pattern.