Speaking at the FTR Transportation Conference, Jack Kleinhenz, chief economist with Kleinhenz & Associates, said the long-running economic expansion is slowing, but added he’s “relatively optimistic about the economy.”
As reported by Truck News:
“The U.S. economy remains resilient,” said Kleinhenz. “In response to the trade war, I think it will weigh on trade growth, but I have the expectation some kind of trade truce will be enacted. The overall macro-conditions are not signaling a recession; I’d say more of a slowdown.”
He did admit uncertainty remains high among consumers, which could have an affect on their spending.
Eric Starks, CEO of FTR, expanded on how slowing economic growth will affect transportation. He noted inventory levels are currently high, due to a build-up in the third quarter of last year, placing constraints on freight growth.
Manufacturing is expected to remain flat, marking a correction.
“We are hearing things are starting to stabilize, things aren’t falling off a cliff,” Starks said. “But that doesn’t generate a substantial amount of freight, it basically holds the freight market where it is. We’re in a holding pattern. But this market is not used to a holding pattern. We don’t know how to hold steady – it freaks us out.”
Active truck utilization is on the decline, from nearly 100% in 2018 to about 88%.
“This is what makes people nervous,” Starks said, “It’s a steady-as-she-goes type of market.”
But lower capacity utilization results in softer rates. “We’ve seen rates coming back down and easing,” Starks said. But he added “relative to history, rates are still at very, very healthy levels historically.”
“This is an environment where market conditions are still relatively healthy,” Starks said. “What happened was, 2018 was so unusually strong, it distorted a lot of things that were happening in the marketplace. As we come back down to normal, we’re now trying to understand, what does normal mean?”
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