James Menzies: I’m James Menzies. I’m editorial director of trucknews.com and Today’s Trucking. And today, we’re debuting a new series called the Five Minute Deep Dive: Five Minutes of What Matters Most. And I’m thrilled to have as a special guest, Eric Starks, chairman of FTR, an industry forecaster that I lean heavily on when trying to make sense of the economy and its impact on the freight market. So, Eric, thanks so much for joining us.

Eric Starks: Oh, James, thanks for having me. It’s such a delight to hang out with you. And five minutes is going to be tough, so I better shut up.

Menzies: Yeah, we were going to try to keep these short and sweet. It’s no secret to anyone watching today that this has been an extraordinarily tough market over the past 10-or-so quarters. You’ve been at this a long time. How would you characterize the broader U.S. economy today?

Starks: Yeah. It’s kind of—it’s just weird. I don’t know. That’s the only way I can say it. It’s kind of a blend between COVID and the Great Recession. And yet, at the same time, things keep moving along. So, there are a lot of risks out there in the marketplace, but we haven’t seen the collapse yet. However — and we’re going to get into this a little bit — we definitely have been seeing things slowing on the commercial vehicle side. And so I think that’s kind of a broader indicator of what’s to come. And I think those are some of the risks really that are playing into how we’re trying to view the market.

Menzies: Okay. Looking at the general economy, GDP slipped into negative territory in the first quarter. But that wasn’t necessarily a bad thing for trucking, was it? Can you help us understand the relationship between GDP and ‘truckable’ GDP?

Starks: Yeah. So with the GDP, the issue there in the first quarter was we had a huge surge in incoming import activity. And so that’s always a negative to GDP. So they subtract that out. So when we look at it for, in essence, ‘truckable’—what is that freight market?—it actually jumped into the first quarter and that wasn’t bad. So, as we move into the second quarter, you’re going to see kind of a weird dynamic. You’re going to actually see GDP go up and you’re going to see that freight dynamic kind of ease because of that import, because we’re going to see imports kind of adjust. And so we’re going to see a drop-off in the second quarter when you look at the GDP numbers.

So you can’t really read into overall GDP at the moment to understand freight. It’s probably helpful for the broader market as we understand the underlying dynamics. But right now, it is suggesting that it’s probably not till the third quarter or fourth quarter before things kind of settle out. And so I think the third quarter is really going to be the one we’re going to be paying heavy attention to for GDP to see if the market has settled down or not.

Menzies: Okay. How’s the consumer doing? I know consumer spending has traditionally been a big driver of freight growth. How’s the consumer doing? Stable?

Starks: Yeah. That’s actually the word I was thinking. It is very stable. It has eased a little bit, but the consumer continues to go out there and buy. And that, for us, is a big deal. So there are a couple of things that we’re paying attention to. One, what’s the driver for the balance of this year for demand? Is it going to be the consumer? Is it going to be the business environment?

And in general, the consumer, we don’t see it just going away. If it does, then I think we have a whole bunch of other issues. They will slow their growth, but they don’t go away completely. And I think a lot of that slower growth is going to be driven more by inflationary pressure as we move through the balance of this year.

So then, the broader question says, ‘Okay, well, if the consumer is going to keep buying, then what could cause a slowdown or what could accelerate growth?’ And I think it’s really going to come from that business investment and equipment. So what are businesses likely to do? They are going to really drive the bus here. And if they pull back and they say, ‘Well, wait a minute, I’m not going to spend,’ then that creates ripple effects. And then that’s where we start having more concerns about employment levels—do they continue to keep hiring? Don’t they? And so, for me, that’s kind of the area that I am most focused on at the moment.

I don’t see the consumer going away, 100%. That could change, though, if we start seeing a noticeable shift inside the housing market. But housing’s already been weak. But the pricing for housing has been high. So there’s this really weird dynamic that’s happening of all these different pressure points in the system that doesn’t give us a hundred percent clear picture to say, here’s where the market’s going.

There are a lot of different avenues that it could lead to. And I think, honestly, with what the administration’s doing with regards to tariffs and things like that, that could really dictate a little bit of how the consumer decides to behave. And there’s no clarity. One of the things, though, too, is if we’re bringing in goods right now, we’re bringing them in for the holiday season. So, the question is, does the pricing that we’re starting to see from, say, for example, imports on tariffs—do those show up in late Q3 into Q4? That’s an unknown at the moment. But clearly, there’s some cost pressure there that could tell the consumer, ‘You know, I’m gonna ease back a little bit,’ but I don’t think they go away.

Menzies: Interesting. A lot to unpack there. Specifically, look for business spending as an indicator, I guess.

Starks: Oh my god. Yeah. Honestly, that is going to be the biggest driver right now for everything. Because if the businesses say, ‘I’m going to eat costs, I’m gonna do all these [things],’ it can have a big change on how the broader economy behaves.

Menzies: Well said. It’s a very fluid situation. It’s never been more important to be informed and be plugged in. You’re gonna dive into this topic in a lot more detail at your transportation conference in September. Tell us a little bit about that event.

Starks: Yeah. So we have four days where we cover commercial vehicles. We do truck freight, intermodal, rail freight. We do rail equipment. It’s a whole host of anybody that is in the transportation, freight transportation space. So we have shippers there, we have carriers, we have suppliers, and we have the investment community there, too. So kind of anybody who is interested in where the market is and where the market’s going.

If you’re trying to set strategy, you’re trying to plan for the future, this is a wonderful way to do that. One, you get to hear from the FTR team, but more importantly, we bring in dozens and dozens of outside experts in the industry to help get insight, because, for us, it’s really important for you to hear different viewpoints.

Menzies: I always attend, and it’s one of my favorite events on the calendar year. And I’ll be there. And if you’re attending for the first time, you’ve got a promotion — we’ll put on the screens – it is for first-time attendees.

Starks: Awesome.