NASHVILLE, Tenn. — Forecasting firm FTR Associates painted a picture of a challenging 2009 economic environment, with many uncertainties affecting predictions for the end of this recession.

In its "Recession Update" webinar for customers last week, moderator Larry Gross said things are changing so fast, "it’s like trying to catch a falling knife."

Truckinginfo.com reports that the webinar was littered with ‘what-ifs,’ and a lot of words like "unprecedented" and "completely new territory." Many economic forecasts are based on how previous recessions have acted, but there are some wild cards to this one, especially the problems in the financial markets, and what effect the stimulus package currently winding its way through Congress will or won’t have, and when.

"If you look at what’s been going on over the last three months, it’s hard to find much to be very joyous about," Bill Witte, director of the Center for Econometric Model Research, told several trucking media. "The first-quarter numbers have all the signs of being pretty dismal."

Still Pretty Crowded: Lower fuel prices has stayed
executions for some carriers. That’ll change in ’09

He said he sees no signs in the data that a bottom is forming, Witte said, adding that the economy is shedding jobs at a faster than expected.

Witte showed two alternate forecasts, both of which call for the economy to start to recover during the second half of 2009, and in full recovery mode in 2010. However, he admitted, it’s also possible that we will see a slower recovery than in past recessions. One unknown in that scenario is American spending and savings habits.

"One of the things that is clear is that American households have undersaved over the last decade and a half," he said. "Whether they will continue that is an enormous question. There may be a shift back toward the kind of saving rate that characterized the U.S. economy in the ’70s and early ’80s, which was on the order of 8 to 10 percent, as opposed to zero recently. That will be very difficult for the economy and means that growth in the economy will be slow for a more extended period."

If that happens, he said, instead of having a fairly robust economy in 2010, it will remain sluggish through 2010 and even into 2011.

Noel Perry, managing director and senior consultant for FTR, noted that from a freight standpoint, this recession started three years ago. That, he said, raises the question of cumulative stress on the industry as well as what’s currently happening, which basically is freight in freefall, he said.

Expect freight rates to fall and more trucking companies to start going bankrupt, said the FTR analysts. Up until about the third quarter of 2008, fleets were able to keep rates pretty stable. As freight levels have fallen off the cliff in the past few months, though, don’t exact that to still be the case. Fleet financials for the fourth quarter have commented on the tight competition for freight. Also, the buffer that fleets had in the second half of last year with rapidly falling fuel prices is going away as fuel prices flatten out.

"All through the latter part of the year, truckers were getting a nice little boost in cash that kept them from going into the trauma you would have expected given the freight environment," Perry explained. That’s just the way fuel surcharges work — you have a negative cash flow as prices go up, but positive cash flow as prices go down. "In the last five to six weeks, fuel prices have flattened. …

"The traffic managers of the world will be under much greater pressure to cut costs in the first quarter." A number of customers, he reported, have already pulled forward their contract negotiations into the first quarter.

This is also all bad news for those involved in selling trucks and trailers. There’s nowhere for those extra trucks to go except being parked. As the economy starts to come back, fleets will start putting those parked trucks back into service, not buying new ones. 

— via Truckinginfo.com