Despite ending 2022’s fourth quarter on a higher-than expected note with 2.9% increase in gross domestic product, two expert freight transportation economists believe the threat of a recession will remain present this year.
Bob Costello, American Trucking Associations’ chief economist, and Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, said, however, that the economy continues to perform at a strong level.
“It’s a unique time right now for the macroeconomy,” Costello said in an interview with Transport Topics. “I still think that the most likely path for the economy is a recession, a mild recession in the first half of the year and what’s called a so-called soft landing is not out of the question. I don’t think that’s the most likely path. I think we could have a mild recession, but it should be rather short and rather shallow for the overall economy.”
Costello went on to say that if a recession does hit, his prediction is that the economy will contract by 1%-1.5% in the first or second quarter of this year then recover and show full-year growth of .5% GDP.
He noted that a contributing factor in keeping the economy stronger than some experts expected is that the job market remains strong with a 3.5% unemployment rate – the lowest since 1969.
Dhawan noted that while the economy is still strong, it is beginning to show signs of gradual slowing as consumers begin to pull back on spending.
“The economy is doing better than I expected at this time. The stock market is having a bit of a rally this year and the last part of 2022, but durable goods spending, big ticket items, cars, washing machines, appliances, things like that, are down,” Dhawan told Transport Topics. “With the higher interest rates, they have fallen a bit in the last month, but they are still more than twice what they were a year ago, and that’s hurting the housing market.”
The housing industry is, however, beginning to show signs of life after enduring a rough second half of 2022 according to the latest housing report from residential real estate brokerage company Redfin Corp.
“The housing market has begun to recover after hitting a low point in the second week of November. We’re not out of the woods yet, but home buyers are coming off the sidelines: The number of Redfin customers requesting first tours has improved 17 percentage points from the November trough, and the number of people contacting Redfin agents to start the home buying process has improved 13 points,” the report said. “Compared with a year ago, home tours and requests for service are down 23% and 27% respectively, but that’s an improvement from the November trough, when both were down 40%.”
Since many materials for home builders and home furnishings are transported by trucks, housing and real estate are crucial sectors for the trucking industry.
Backing up Costello’s and Dhawan’s assessments of the state of the economy, the final report on holiday sales from the National Retail Federation said consumers increased year-over year spending by 5.3% to $936.3 billion, which fell slightly short of the organization’s forecast of growth between 6%-8%.
For the full year, retail sales grew by 7% over 2021’s mark to $4.9 trillion, meeting NRF’s forecast of between 6%-8% growth for the year.
“The last two years of retail sales have been unprecedented, and no one ever thought it was sustainable,” NRF President and CEO Matthew Shay said. “Nonetheless, we closed out 2022 with impressive annual retail sales and a respectable holiday season despite historic levels of inflation and interest rate hikes to cool the economy.”
Costello added that the trucking industry continues to see growth, pointing to December’s truck tonnage index, which showed a 3.8% year-over-year increase and a 0.3% month-to-month growth.
Costello went on to say that while those numbers are solid, the industry will likely see a slowdown in freight as the economy regains a more traditionally balanced position as far as spending. During the height of the pandemic, he said consumers were spending more on items such as furniture, televisions, and computers while staying off airplanes and out of hotels, but that balance is shifting back now as more people are traveling again and spending on goods and services is shifting back into balance. As these changes occur, there could be repercussions for the trucking industry in 2023.
“The freight market is worse than the macroeconomy.” Costello noted. “If you’ve been on a plane recently, they’re packed. People are going back to sporting events, they’re going back to the movies. People are not spending as much on goods as they were. Freight decelerated in the fourth quarter, and there was no traditional peak season.”
Source: ttnews
