As I write this, the North American, Asian, and European stock markets have plunged yet again amid a massive selloff of stocks and escalating fears about not just a North American but a global recession. The Europeans are debating whether they should even bother to open their stockmarkets this week. And I’m just back from the American Trucking Associations annual conference in New Orleans and can honestly say I have never seen the Americans so down about their industry, their economy or their country – even after 9/11 they weren’t this despondent.
A few days previous I was listening to Stephen Forbes on satellite radio saying “this is the closest to the abyss we’ve come since the Great Depression.” And the worst may be yet to come. According to Mark Vitner, managing director and senior economist with Wachovia Corp and a panelist at ATA’s popular Eyes on the Economy session, all the credit problems in the economy have yet to surface and credit for business will not open up till sometime in 2009. Not only are we already in recession, according to Vitner, but our economic troubles will be deep and long, much like the recessions of 1973-75 and 1981. It took the economy 16 months to show any signs of recovery from those recessions and the toll on unemployment was considerable.
With such dark clouds on the horizon is there anything to feel good about? Actually, there is.
With economies world wide slowing down, consumption of oil is falling like a stone and, as a result, oil prices are dropping. While I was in Orleans the price for crude had dropped below $90; a few days later it was down to $80. Vinter said that if it fell below $70, he didn’t know how far it would fall.
The industry’s calls for massive improvements to the continent’s infrastructure may also finally fall on receptive ears as governments on both sides of the border look for infrastructure projects to stimulate the economy.
And finally, capacity, already tight after a year of bankruptcies in the US, is going to get tighter as the economic malaise spreads to Canada and the tight credit makes it difficult to impossible for new companies to enter the industry. The number of trucks in the TL sector in the US shrank by 2.7% in 2007 and by 1.3% in the first six months of 2008. And these trucks are not just being parked; they are being sold overseas, mainly to Nigeria and Russia. (The latter purchased almost 6,000 trucks from the US in the first half of this year.) So when the North American economy does show the first signs of health, the upward pressure on rates will be substantial.
For the companies and owner/operators resilient enough to weather the next year or so, the recovery will be worth it.
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