PHILADELPHIA, Pa. — Slumping freight volumes and the absence of a strong fall shipping season are the result of manufacturers building up inventories in response to last year’s capacity crunch, and are not necessarily a precursor of things to come.

That was one of the theories shared by American Trucking Associations (ATA) chief economist Bob Costello and IHS chief economist Nariman Behravesh, who shared a stage during an economic presentation at the ATA’s Management Conference & Exhibition here today.

Manufacturers are “working through an inventory cycle, keeping freight volumes flat,” said Costello. He noted a year ago, shippers were seeing some of the tightest capacity in history and they responded by building up inventories. That inventory glut is now being worked through and once that happens, freight volumes should resume stronger growth, Costello added.

Both Costello and Behravesh agreed the US economy is on solid ground. While the Chinese economy has slowed, Behravesh pointed out exports to China account for just 1% of US GDP. Closer to home, the US’s bigger trading partners are experiencing a mixed bag. Behravesh said the Mexican economy is growing well but Canada’s is trailing.

“Canada is a little bit of a problem,” he said. “The reason for that is, Canada is in recession right now. They’re much more exposed to oil than we are – about 10% of the economy compared to 2-3% of the US economy (is dependent on oil). So Western Canada, especially places like Alberta, are very exposed to oil and in fairly deep recessions. The Canadian exposure to oil is pretty big.”

The emerging markets are experiencing even worse economic conditions.

And China, despite is continued growth, is a problem.

While China touts 7% GDP growth, Behravesh said it’s closer to 4-5%. China has a debt problem on its hands. About seven years ago its debt-to-GDP ratio was a bout 120%; now it’s about 280%, Behravesh noted.

“No economy has every gone through that kind of debt exposure without something bad happening,” he said, noting China will likely see sub-par growth for the next three to five years.

Here at home, Costello said some segments of the trucking industry are doing extremely well, while others are experiencing recession-type activity.

“Once we get through this inventory cycle, the US economy is on solid footing and I expect a good uptick in freight volumes,” he said, adding that will happen very quickly.

Year-to-date truckload load volumes are up 1.9%, but that year-over-year growth slowed to 0.8% in August. Most of the y-o-y freight growth seen in 2015 occurred early in the year, and were compared to volumes in early 2014 that were affected by severe winter storms.

Truckload dry van loads are up just 0.8% this year compared to 2014. Flatbed carriers are seeing more demand for building materials transportation but less demand for steel and fracking-related freight. This segment is down 3.7% this year but saw growth in August, Costello noted.

Tankers saw 0.2% year-over-year growth in freight volumes so far this year while refrigerated loads are up about 10%. Costello said this spike may be the result of shippers sending more types of freight in temperature-controlled trailers.

In the LTL world, Costello said there’s been little growth in load volumes compared to 2014, because much of that freight is moving over to the truckload sector.

But the good news, which could drive further freight growth, is that consumer spending is robust and expected to strengthen further, according to Behravesh. Increased consumer spending is being driven by: low energy prices, employment growth, rising disposable income and higher household net worth. IHS believes consumer spending in the US will grow by 3-3.5% this year.

Lower gas prices, Behravesh said, are equal to giving every US household a $1,000 per year tax break. When Americans’ net income increases, they tend to spend 90% of it and save 10%, said Behravesh, so cheaper gas prices are good for consumer spending.

More good news on this front is that their spending is no longer debt-financed like it was before the Great Recession, meaning this level of consumer spending is sustainable.

“The debt burden of US households is far lower than it has been in some time,” Behravesh said.

When it comes to capacity, Costello said growth has been constrained by the driver shortage, though there’s more capacity in the market this year than last. Tractor replacement activity is high as fleets look to replace older trucks in an attempt to lure more drivers.

The total number of truckload tractors increased 0.7% so far this year compared to 2014, with small fleets accounting for a higher percentage of purchases.

IHS’s Behravesh predicted after the inventory correction runs its course, manufacturing production growth will rebound later this year and into 2016 – more good news for fleets.

Behravesh also takes an optimistic view of prospects for the energy and housing sectors. He said some of the marginal players in the oil and gas sector will be squeezed out, resulting in a decrease of production, and due to cost-cutting measures those left will be sustainable even if oil’s as low as $49 per barrel. Before the downtun, Behravesh said the break-even point for these producers was closer to $70 per barrel.

“It won’t take much of a rise in prices to get investment going again,” he said. Today, oil imports account for about 24% of US consumption, but that’ll decrease to about 17% by 2025, which is a good-news story long-term, Behravesh said, since energy independence has been a long-time aspiration in the US.

The housing sector is another good news story, Behravesh added.

“Housing will continue to be an engine of growth,” he said, noting affordability is better today than it was in 1970. Housing growth is being driven by “household formations,” meaning young people getting into the housing market for the first time.

But despite all the reason for optimism, Costello pointed out there’s still no quick fix for one of the industry’s most pressing concerns: the driver shortage.

It’s “as bad as ever,” Costello said, noting the US trucking industry is currently short 48,000 drivers, which could climb to a shortage of 175,000 by 2024.

“If we get to 175,000, we’re in a bunch of trouble,” he said. “It will slow down the US economy.”

Driver turnover is a good indication of the driver shortage, since higher turnover indicates the ease of finding new employment. Truckload fleets are experiencing annualized driver turnover of 86% (the peak was 135% in 2005) and LTL carriers are seeing turnover at only about 11%.

Costello said driver pay increases are likely in order, noting wage hikes for drivers will likely outpace the broader population. Double-digit pay increases have been seen over the past year and he said it’s going to continue. Other solutions could include more home time, lowering the age limit to obtain a CDL, improving driver image and better treatment of drivers within the supply chain.

“We’ve got some work cut out for us,” he said.