Busy season deflated: ATA economist

BIRMINGHAM, Ala. — October has traditionally been the peak of the fall freight season, but don’t expect to see a big bump in freight this month, says ATA Chief Economist Bob Costello — or much economic improvement until the second half of 2008.

Speaking last week at the McLeod Software User’s Conference in Birmingham, Ala., Costello noted that holiday retail sales are forecast to increase at their slowest rate since 2002. However, he said, there’s a more “structural change” at work here.

Trucking’s forecast has become more pessimistic than
it was during the spring and early summer: ATA.

“It’s not just shippers that have done this,” Costello said. “More people are buying gift cards, so retailers don’t need as much merchandise on the shelves in the fall, but they will need more after Christmas. As a result, we now are seeing a larger January increase in freight – 4.2 percent over the last two years, compared to less than 2 percent in the previous 10.”

Costello also said that in the last few weeks, the economic forecast has become more pessimistic than it was during the spring and early summer.

“The outlook has worsened in recent weeks,” he said. “At this time recession is not expected, but the probability of a recession has increased in recent weeks to 40 percent.” Economic growth will be slow through at least the first half of 2008. And, of course, we have seen overcapacity in the industry due to the 2007 pre-buy coupled with the slowing economy, he added.

The good news, Costello said, is that capacity changes turn around faster in response to the economy than they used to. “Once the economy turns around, the right trends are in place to improve capacity in the industry fairly quickly once freight volumes improve. The underlying fundamentals — i.e., the driver shortage — still supports tight capacity, and truck sales are expected to be significantly lower this year.”

— via Truckinginfo.com