Is your head spinning yet from all the economic volatility and second guessing about what it all means about our industry’s future? After spending the last few days immersing myself in the economic turmoil taking place in Europe and what it could mean for our fragile recovery, I travelled to Ottawa to listen to the economic predictions from the menagerie of economists gathered at the Chartered Institute of Logistics and Transport’s annual Outlook Conference. And I can assure you, my head is spinning. Are we ever going to get a handle on this thing? It seems every second person has a somewhat different take on what is shaping the recovery, if we are even in a real recovery.
Just last month I wrote in this space that it seems we’re stuck in a prolonged in-between phase with the recession technically over but with the recovery nowhere near as robust as would have been hoped. I mentioned that many of the motor carrier executives I spoke to in January and February were telling me they’ve seen little in terms of growth in freight volumes. But then March and April appeared to be much better in terms of freight volumes and the government reported that the Canadian economy created 108,700 jobs in March – more than four times as many as expected and the largest monthly gain on record. Industrial growth is looking good again and the GDP gains of the first quarter were impressive. As Peter Hall, vice president and chief economist for Export Development Canada, told the conference: “this is the stuff of optimism.” Carl Sonnen, president of the respected research group, Informetrica, went as far as to say the near term probability of a “V” shaped recession is moderately high.
Sounds like it’s time to break out the bubbly. You’ve survived the worst economic downturn since 1961 (multiplied by a factor of 7 to be precise, in terms of severity). Ah, but if it only were that simple. The economic forecasters are spinning several qualifiers into their forecasts. It seems there are several risks that could push us back into recession, according to Hall.
There is a risk the unprecedented levels of government stimulus that jump started the North American economy will run out before businesses are ready to tackle the recovery on their own, plunging us back into the economic abyss; the financial markets, perhaps spooked by another Greece, could freeze the availability of credit, choking off business growth in the process; commodity prices are higher than market fundamentals would justify and a sharp correction to their pricing could hurt the economy; the Bank of Canada could get overzealous about controlling inflation and stifle the recovery with higher interest costs; while protectionist sentiments south of the border could start driving trade legislation.
Hate to be the bearer of bad news – would much rather believe the positive first quarter results are an indisputable sign of economy recovery – but it sounds like the next six-month period will be critical in determining if the recovery is real or not.
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis