For several years now I’ve been appointed to provide the wrap-up and summary at Richard Lande’s popular Transportation Innovation and Cost Savings Conference. I joke with the wily Richard that by giving me this task, he’s finally found a way to ensure the media shows up on time, pays attention and stays till the end. Truth is, challenging as it may be to summarize the thoughts of several industry experts on several different topics into one cohesive 15-minute summary, I actually enjoy the experience. I’ve found over the years that if you pay close enough attention there is usually a common thread to be found in the words of the industry experts.
Yet I must admit this year I found that task particularly difficult because I couldn’t take my mind away from the words of the first speaker: Peter Hall, vice president and chief economist with Export Development Canada. Over and over throughout the day my mind kept drifting back to Hall’s gloomy message: Our domestic economy, the US economy and the global economy are all moving slow enough right now that the probability of a double-dip recession is high. The likelihood of falling back into the financial abyss is getting close to 50%, according to Hall.
Can he be right, I kept thinking throughout the day. Can our industry have survived the deepest recession of the post war era, with many carriers practically hanging on by their fingernails, only to drop back into the black hole of economic despair after such a short period of economic recovery? I spoke to many of the conference participants during the breaks throughout the day; they all kept saying the same thing: we hope he’s wrong.
Problem was he sounded so convincing.
There are several reasons we may be headed for a double-dip recession, according to Hall. He believes the aggressive growth we saw during the end of last year and during the first quarter of this year had much to do with all the stimulus spending from governments around the world but is now petering out before real economic growth kicks in. He’s also concerned about several signs of weakness in the US, the world’s largest economy. He believes the US housing market still requires another year to recover and US consumers may need as long as that and perhaps a bit longer before they feel secure enough about their savings to get back to normal spending levels. He also sees trouble for the global economy with Japan and China headed for recession. And this time around, debt-loaded governments don’t have the maneuvering room to help sustain their economies like they did two years ago.
Yet as convincing as Hall is (and having heard him speak before and being a fan of his weekly column I have a great deal of respect for him), we should be cautious in accepting his reading of the situation as gospel. Leading transportation industry forecasters speaking at the recent Commercial Vehicle Outlook Conference seemed just as certain that fears of a double-dip recession are overblown.
Despite startling new housing figures that showed sales of previously-owned US homes were down 27% in July and housing starts down 12% compared to June, Eric Starks, president of FTR Associates said there’s little reason to fear a double-dip recession and pegged the likelihood of such a scenario at just 10%. Starks, who keeps a Trucking Conditions Index, believes what we will get instead is several months of very slow growth that will make motor carriers feel like they’re treading water. The only way the US economy is falling back into recession, Starks believes, is if it gets hit by some external global issue.
Those sentiments were echoed by Donald Broughton, managing director and senior analyst with Avondale Partners and a frequent guest on TV news and business programs. Broughton blamed those very programs for creating unnecessary anxiety.
“People are way more worried than they should be,” he said. “(Freight) demand is going up. It’s going up across the board, in every single freight mode.” He urged attendees not to be discouraged by mainstream media reports or stock market selloffs.
“Markets are a reflection of us; we are full of greed and full of fear. It takes a long time to instill confidence in us and it takes no time at all to instill panic,” he said of the markets.
Sounds like sage advice to me….until I see the third quarter numbers anyway.