Leading the Way

When will we know the recession is over? Some say that day happened when the National Bureau of Economic Research officially designated the sorry economic conditions since last March as a recession. Incidentally, NBER says the recession put an end to a 10-year period of expansion that began in March 1991 – the longest expansion recorded by the research group in its 80-year history. Many observers say that by the time the experts agree to agree that the economy is in recession, the worst is usually over and a recovery is underway.

Hopefully, that is the case and we are on the brink of a new round of economic growth. Then again, the economy may not have hit bottom yet, and the recovery may be well down the road.

Consider that since the announcement by NBER’s panel of economists on Nov. 26, the economic outlook remains difficult at best with rising unemployment, dropping factory orders and decreased consumer spending. Despite the dire conditions, many still look for a recovery later this year. Economists warn that if it happens that soon, the recovery may be a relatively mild affair and the new round of growth will probably not match the rapid rate of the early and mid-’90s.

That brings us back to our original question: How will we know when things have turned around, apart from some TV pundit telling us so? Truckers may be in a position to note the upsurge quicker than others. Some industry-watchers consider trucking a leading indicator of economic activity, meaning as trucking picks up or slows down, the economy follows some weeks or months down the line.

Others think trucking moves along with economic fluctuations, or even a bit behind economic trends. Bob Costello, economist with American Trucking Associations, says measures of consumer confidence, an indicator used by many to track economic health, do not apply directly to trucking. Rather, consumer confidence influences how much people buy, and what they buy influences how much retailers order, and what retailers order influences what manufacturers produce. In that sense, trucking sees economic benefits after consumers return to their spending habits.

Much depends upon what industry segment you are talking about. “The [less-than-truckload] trucking industry is what I call a ‘coincidental’ indicator,” says Bob Delaney, vice president with Cass Information Services, an electronic freight-billing service. “I guess the truckload side may be a leading indicator because it shows inventory building, but I think the LTL side shows coincidental activity. It’s about a month before you see truck activity picking up” if consumers are spending heavily.

With inventories and order backlogs continuing to drop, some observers predict that as the economy gains momentum these low inventories will prompt increased manufacturing activity, as retailers seek to add stock. That could prove a boon for truckers who serve manufacturers and their distribution networks. If Delaney’s logic holds, that may be followed by increased activity on the LTL side, as goods begin to move from distribution centers to wholesale and retail outlets.

But for now, freight is still showing a downward trend. According to the Cass Freight Index, the number of shipments and the value of those shipments fell in November 2001 after a slight uptick in October. The expenditures index fell to 1.183 in November 2001 from 1.250 in October. The shipments index fell to 0.979 from 1.057 over the same period. Despite the better numbers in October of last year, the index has continued a downward trend since August 2000.

Hopefully, you will find yourselves busier in coming weeks. That could mean we are pulling out of the downward spiral, and trucking could be leading the way.

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