The old saying "when the US sneezes, we catch cold" may not hold quite as much weight as it used to - a variety of factors have caused the US share of our exports to come down from its high of 87% pos...
The old saying “when the US sneezes, we catch cold” may not hold quite as much weight as it used to – a variety of factors have caused the US share of our exports to come down from its high of 87% posted back in 2000. But the economic health of our largest trading partner and the world’s largest economy still has a considerable impact on our own fortunes.
So although our economy remains strong, I’m growing increasingly concerned about the economic indicators out of the US these days, particularly the transportation indicators which I believe serve as early warning signs of things to come. What was hailed by just about every economist I listened to over the past year as a US housing market slump that would prove to be nothing more than a market “correction” is now showing signs of sapping the willingness of US consumers to continue their buying spree. The “R” word is even openly being uttered at important industry gatherings. At the recent American Trucking Associations convention, ATA chief economist Bob Costello suggested the fall freight season will be muted and he pegged the chance of a recession in the US at 40%.
Costello agreed with many other industry analysts that the US is already in a “freight recession,” explaining that the small bump in freight witnessed in late spring and early summer never really materialized into steady growth.
There’s also good reason to be concerned about intermodal volumes. The historical correlation of intermodal traffic and the US economy has been strong.
Since 1990, intermodal volumes have turned negative three times, and during two of these periods the US economy fell into a recession. Intermodal volumes are down 2.9% in the last six months. Our US correspondent Gordon Feller reported this month that container imports into the major US West Coast ports have weakened considerably, while inbound volumes at the massive port of LA-Long Beach have turned negative two consecutive quarters for the first time in at least 12 years.
Of course, the meteoric rise of the Canadian Loonie has been tarnishing the appeal of our manufacturing exports to the US for some time now and making it harder for transborder carriers to find US-bound freight. Excess truckload capacity southbound is placing downward pressure on rates, and threatening to consume the rate gains realized from 2003 to 2006.
In this harsher economic climate growth is more likely to be found through first understanding which markets will prove the most durable and profitable and then nimbly reallocating resources to them.
Greater operational efficiency will also be critical and to that end the strong Canadian dollar will make for some great deals for those in the market for new equipment.
In the end, how carriers adapt to the choppier times ahead may go a long way towards determining how ready they will be to seize the better times that are sure to follow.
Truck News is Canada's leading trucking newspaper - news and information for trucking companies, owner/operators, truck drivers and logistics professionals working in the Canadian trucking industry. All posts by Truck News