There’s no gentle way to say this folks: it looks like we’re in the soup and we’re going to be in it for a while.
Any signs of hope -the unexpectedly high volume of house sales recently reported in the US, the gain in job numbers here and the uptick in Class 8 truck sales in September, the initial reactions of the stock markets to the US stimulus package or the strong results of the US election -are just that: wishful thinking that we’ll somehow avoid a long and painful recession.
Reality is North America is probably already in recession. The figures that really matter all don’t look good. The North American economy is driven by consumers and they’re curbing their spending. Any fleet or owner/operator picking up from any of our major ports, aside from Montreal, has already been feeling the pinch. Lower consumer spending results in importers cutting back on orders of consumer goods, which in recent years have been manufactured in Asia. For example, the amount of electronics arriving in October was down 9.6% from the previous year while clothing was down 7.8%.
Vancouver, our largest port and a significant driver of west-to-east truck traffic, has already been reporting fewer containers arriving during the critical pre-Christmas season. Prince Rupert was expanded to add much needed capacity on the west coast and can handle 500,000 containers annually. But it doesn’t look like that extra capacity will come anywhere near being needed this year. After the first nine months of the year, Prince Rupert has handled just a little over 100,000 containers.
On the east coast, the Port of Halifax saw a 16% drop in cargo volumes during the first half of this year.
And although traffic originating out of the Port of Montreal is still looking good this year with a 9.9% increase in container traffic during the first nine months and projections for continued growth next year, port authorities have now trimmed their expectations for next year’s growth down to 5% from 7%.
The drop in demand for consumer goods is also now being reflected in another telling indicator of economic health: the Baltic Dry Index, which measures the cost to ship bulk commodities such as coal and grain.
The index has gained a strong reputation as a forecast of global economic activity because the level of demand to move commodities is an indicator of the demand to produce finished goods. And the Baltic Dry Index has dropped 90% since May.
If this is going to be a long-term recession, like what we experienced back in 1973 to 75 and in 1981-82, it could take more than 15 months for any sort of recovery to take root.
Now is the time to ensure your business is properly positioned to weather the coming storm. •
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