tag:blogger.com,1999:blog-30829342532657913602024-03-13T04:37:05.217-07:00Ake's Trucking EconomicsThis blog looks at how economic factors impact the commercial transportation industry and how factors in the trucking industry affect the overall economy.Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.comBlogger196125tag:blogger.com,1999:blog-3082934253265791360.post-34298562463537035702021-07-17T08:48:00.005-07:002021-07-17T12:34:43.641-07:00How Demand Outpaced Supply<p><span face="Arial, sans-serif" style="font-size: 14pt;">Mr. Demand and Mr. Supply were constantly jogging along the
Economic Trail.</span><span face="Arial, sans-serif" style="font-size: 14pt;"> </span><span face="Arial, sans-serif" style="font-size: 14pt;">Most of the time, they
ran in </span><span face="Arial, sans-serif" style="font-size: 14pt;">tandem, at about the same speed. But sometimes Mr. Supply ran ahead
of Mr. Demand and often the roles were reversed. But</span><span face="Arial, sans-serif" style="font-size: 14pt;"> then, they would instinctively
adjust their pace to get back into balance once again.</span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-l7RoWKZnl1I/YPL7hCPupGI/AAAAAAAASgQ/-5ndUO35kWoHWotiK5mE2713LaIfNSYcQCLcBGAsYHQ/s2048/runners%2B2.jpeg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1597" data-original-width="2048" height="186" src="https://1.bp.blogspot.com/-l7RoWKZnl1I/YPL7hCPupGI/AAAAAAAASgQ/-5ndUO35kWoHWotiK5mE2713LaIfNSYcQCLcBGAsYHQ/w238-h186/runners%2B2.jpeg" width="238" /></a></div><br /><br /><p></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Mr. Price always accompanied Mr. Demand and Mr. Supply on
the trail. Mr. Price could be unstable so instead of jogging he rode a bicycle.
When Mr. Demand got ahead of Mr. Supply, Mr. Price would pedal faster to get
ahead of Mr. Demand. Then he would force Mr. Demand to slow down so Mr. Supply
could catch up to him. When Mr. Supply ran ahead of Mr. Demand, Mr. Price would
drop back, causing Mr. Supply to slow down and Mr. Demand to speed up. In both
circumstances, as soon as Mr. Demand and Mr. Supply were back in sync, Mr.
Price could be found pedaling right beside them.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Everything was moving along fine on the Economic Trail
until March of 2020 when both Mr. Demand and Mr. Supply were infected with
COVID-19. Both guys immediately stopped and sat down on the trail<span style="mso-spacerun: yes;"> </span>to recover. Fortunately, Mr. Demand had only
a mild case of the virus. Soon he felt much better and started running again at
a modest pace. <span style="mso-spacerun: yes;"> </span>Unfortunately, Mr. Supply
got much sicker from the virus. He lay weak and dormant for a couple months. He
finally got up and tried to run but stumbled along at a slow pace.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Mr. Demand continued to recover and picked up the pace. His
Uncle Donald even gave him some strong coffee to help his recovery. Mr. Demand was
now running much faster than still sickly Mr. Supply, and the gap was widening.
Mr. Price had also been infected but was asymptomatic. He had stopped on the
trail, waiting for Mr. Demand and Mr. Supply to recover. He had followed Mr.
Demand back on the trail and expected Mr. Supply to follow them, but he had not.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Now Mr. Price was pedaling faster but didn’t know quite
what to do since Mr. Demand was not slowing down and wasn’t concerned at all
that Mr. Supply was falling so far behind. The gap between Mr. Demand and Mr.
Supply had not been this wide for many years.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Even though Mr. Demand appeared to be healthy, his Uncle
Joe was concerned he was not running fast enough. So, Joe gave him an energy
drink, a stimulus, to get him to run faster. But no one was concerned with the
condition of Mr. Supply. Even though Mr. Supply was increasing his pace, Mr.
Demand was still running much faster.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Uncle Joe was so happy that the first stimulus worked so
well, he jolted Mr. Demand with a second energy drink. Now Mr. Demand was
sprinting at top speed. However, even though Mr. Supply was trying to run faster,
there were obstacles on the trail which slowed him down. He asked for people to
work to help him run faster, but they were too distracted by Mr. Demand’s
stimulus, to aid Mr. Supply. Others declined to help due to the persistence of
the pandemic. <span style="mso-spacerun: yes;"> </span>And some potential workers
had left the trail altogether. He also needed a new pair of running shoes, but
he couldn’t get them due to a shortage of silicon.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">So, no matter how hard Mr. Supply tried to catch up, he
could not, and Mr. Demand was now miles ahead of him. This motivated Mr. Price
to pedal faster than he ever had since the 1980’s. He needed to get ahead of
Mr. Demand and slow him down, so Mr. Supply could catch up. But he was pedaling
so fast that his tires got overheated and are now highly inflated, and he fears
a blowout, which could lead to a crash.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">And so it goes ……<o:p></o:p></span></p><p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;"><br /></span></p><p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;"><span face="Verdana, sans-serif" style="background-color: #e0e0e0; color: #333333;">This post originally appeared in the FTR blog. For more information on FTR, the leader in commercial freight analysis and forecasting: </span><a href="http://ftrintel.com/" style="background-color: #e0e0e0; color: #666699; font-family: Verdana, sans-serif;">FTRintel.com</a> </span></p><p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;"><br /></span></p>Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-7255391645907615612021-04-24T16:58:00.001-07:002021-05-04T17:09:46.657-07:00Let The Roaring Twenties Begin!<p><span face="Arial, sans-serif" style="font-size: 14pt;">In ’21, we see an economic recovery unlike never before. Of
course, I am referring to 1921, after both WWI and the Spanish flu had ended.
But the country's mood now, as vaccines work to end this pandemic, is beginning
to rise toward a euphoric state.</span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">This, combined with tremendous government stimulus efforts,
has caused the demand for goods to skyrocket. The GDP forecasts for 2021
continue to move higher. FTR (Freight Transportation Research) forecasts 2021 GDP growth at 6.1%. In the latest
Wall Street Journal survey of economists, the range is from 2.4 – 10.0%, with
the average at 6.0%.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The ISM (Institute of Supply Management) Indexes, which are
forward-looking, confirm there is robust demand present now and in the
foreseeable future. The March Manufacturing PMI spiked almost four percentage
points to 64.7, the highest reading in 37 years! IHS Markit’s Index placed it
at the second-highest reading ever. Likewise, the Services PMI jumped over
eight percentage points, to 63.7, an all-time high. <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The economic shutdown in March-May 2020 created enormous
pent-up demand in the economy. It produced a “sling-shot effect”, where commercial
activity was held back and then propelled forward rapidly. Therefore,
substantial pent-up demand built up during the economic lockdown and was
unleashed in the restart.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">However, there was no pent-up supply, rather the opposite,
in fact. Factories shut down, during well, the shutdown. Unfortunately, the
restarts in many industries have been difficult. Manufacturers had to install
COVID safety protocols. Workers have been reluctant to return to jobs either
based on personal health concerns or generous government assistance. The global
supply chain was also impacted, resulting in huge backlogs at the ports. Throw
in February’s polar vortex, and you get an unprecedented widespread shortage of
components, parts, and industrial output.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The result is surging demand combined with pent-up demand,
matched up against constricted supply. Of course, this creates more pent-up
demand since manufacturing has still not caught up in the short term. Pent-up
demand clouds the economic forecast because it is difficult to measure and
determine how long it will take to catch up. However, the ISM numbers show it
is massive and growing.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">For an estimate of overall manufacturing pent-up demand, it
appears that the current supply of Class 8 trucks is running about 20% behind
demand. Truck manufacturing is being impacted by the shortage of
semiconductors, but many industries are not. Therefore, let’s estimate the
total pent-up demand in all manufacturing at 15%. Meaning the supply is running
15% below total demand. Combine this with the enormous pent-up demand in the
service industries due to the pandemic, and the economy is set up to surge in
the next 12 months.<o:p></o:p></span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="line-height: 107%;"><span style="font-size: 14pt;">When there is another pandemic, perhaps world governments
should expand the definition of essential workers to include those industries
that should not be shutdown because their products are essential to a restart.
They could receive government loans to build inventory and quickly repay the
loans when the </span></span></p><div class="separator" style="clear: both; font-size: 14pt; text-align: center;"><a href="https://1.bp.blogspot.com/-sDfXkC3wy1A/YISwIKUbDmI/AAAAAAAARbc/P-VNyTwEsf8aHbA9G-oOBP5VM-KhMroPwCLcBGAsYHQ/s700/roaring%2B20.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="394" data-original-width="700" height="165" src="https://1.bp.blogspot.com/-sDfXkC3wy1A/YISwIKUbDmI/AAAAAAAARbc/P-VNyTwEsf8aHbA9G-oOBP5VM-KhMroPwCLcBGAsYHQ/w294-h165/roaring%2B20.jpg" width="294" /></a></div><br /><span style="font-size: large;">inventory sells.</span><span style="font-size: 14pt;"><o:p></o:p></span><p></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">If you never understood what the Roaring Twenties were, you
are about to get a very personal history lesson. But whenever I make that
statement, the comment I always hear is: Yes, but remember what followed the
Roaring Twenties.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Well, advancements in medical intelligence and technology
have enabled us to significantly limit the fatalities from COVID-19 versus the
Spanish flu, on a population percentage basis. Let’s hope our knowledge in the
field of economics has made similar advancements.</span></p><p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;"><span face="Verdana, sans-serif" style="background-color: #e0e0e0; color: #333333;">This post originally appeared in the FTR blog. For more information on FTR, the leader in commercial freight analysis and forecasting: </span><a href="http://ftrintel.com/" style="background-color: #e0e0e0; color: #666699; font-family: Verdana, sans-serif;">FTRintel.com</a> </span></p>Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-3485980147324988572021-03-14T16:11:00.002-07:002021-03-14T16:12:27.248-07:00Are the Fears Inflated?<p><span face="Arial, sans-serif" style="font-size: 14pt;">You’ve probably seen the
headlines about some economists becoming increasingly concerned about
inflation. So, should we be concerned?</span><span face="Arial, sans-serif" style="font-size: 14pt;"> </span><i style="font-family: Arial, sans-serif; font-size: 14pt;">(Note:
please keep reading. This is not one of those in-depth analysis involving
T-bills and yield-curves, but more of a big picture, horse-sense type of view.)</i></p>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Definitions<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">The most basic definition of
inflation is: Too many dollars chasing too few goods.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">A more precise definition
from Investopedia: <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">“Inflation is the decline
of </span><a href="https://www.investopedia.com/terms/p/purchasingpower.asp"><span color="windowtext" face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial; text-decoration: none; text-underline: none;">purchasing power</span></a><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;"> of a
given currency over time. A quantitative estimate of the rate at which the
decline in purchasing power occurs can be reflected in the increase of an
average </span><a href="https://www.investopedia.com/terms/p/price_level.asp"><span color="windowtext" face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial; text-decoration: none; text-underline: none;">price level</span></a><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;"> of a </span><a href="https://www.investopedia.com/terms/b/basket_of_goods.asp"><span color="windowtext" face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial; text-decoration: none; text-underline: none;">basket of selected goods</span></a><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;"> and
services in an economy over some period of time. The rise in the general level
of prices, often expressed as a percentage, means that a unit of currency
effectively buys less than it did in prior periods.” </span></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-mpRd5nXLuZ4/YE6XthH9OUI/AAAAAAAAREI/x5BzKgL0dDQoUh_lBD3ym1J_X4LK8ksZQCLcBGAsYHQ/s1600/balloon.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1600" data-original-width="1321" height="254" src="https://1.bp.blogspot.com/-mpRd5nXLuZ4/YE6XthH9OUI/AAAAAAAAREI/x5BzKgL0dDQoUh_lBD3ym1J_X4LK8ksZQCLcBGAsYHQ/w209-h254/balloon.jpg" width="209" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Some inflation can be good</td></tr></tbody></table><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;"><br /><o:p></o:p></span><p></p>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Complicating Factors<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Inflation is inherently
challenging, because it means your money is worth less, because it can buy less
goods or services. However, economists generally believe that a low, and
steady, inflation rate of around 2% is good because it signifies a growing,
healthy economy. Inflation, under control, does help to balance out imbalances
in basic supply and prices.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">We have not had to deal with
high inflation for a long time. The last time inflation was above 5% was in
1990. The last time inflation was above 10% was 1980. The Clinton
administration achieved strong economic growth, with low inflation, by
significantly increasing imported low-priced goods from China. Economists
labeled this strategy as “importing deflation”. This strategy worked so well it
has been advanced by every administration since then, except for one.<span style="mso-spacerun: yes;"> </span>But that’s a political discussion, and I’m not
swimming in that pool.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">The other factor limiting
inflation has been technology, especially the tremendous efficiency benefits
provided by the Internet. Technology and the efficiency it provides, lowers
just about every type of cost, thus reducing inflation.<o:p></o:p></span></p>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Current Situation<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">But let’s get back to this
“Too many dollars chasing too few goods” thing. Why are economists concerned?<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Too Many Dollars?<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">The government flooded the
economy with cash in 2020 with the stimulus deals. This helped many people in
financial distress, but many people received checks they didn’t need.<span style="mso-spacerun: yes;"> </span>Consumers spent this windfall or saved the
money for future purchases. And now, there is even more stimulus money on the
way. From my point of view, there are too many dollars currently in circulation.
This by itself might not be a problem, but...<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Too Few Goods?<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Ever since the economic
restart, some goods were in short supply. The list included both consumer goods
and industrial goods in an extensive range of industries. For example, there
was a severe shortage of hotel towels in October, and some of those are
produced in Pakistan. And now, there are reports of cat food shortages in some
areas of the country.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">While many of the shortages
have been alleviated, some have intensified. We see the headlines for computer
chips and steel, but we know in the commercial equipment industry that these
products and a host of others are in short supply. The supply chain is in a
mess. I’m guessing manufacturing material, and component shortages are in the
worst shape since WWII. <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">So, we can’t make enough
products to satisfy demand. Combine this with consumer products sitting on
ships for days waiting to dock and then being delayed a few weeks due to port
congestion, and you end up with too few goods. The inventory numbers confirm
this.<o:p></o:p></span></p>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">What? – Me worry?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Federal Reserve Chairman
Jerome Powell has finally admitted that he expects some inflationary pressure
as the economy reopens but expects it to be temporary. Previously, he said he
is not concerned because inflation doesn’t “change on a dime” and that a return
to standard 2% inflation rates is not a danger. He also thinks the FED will be
able to control the inflation once it starts.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">In effect, he is saying they
will be able to control the boulder once it begins to roll downhill. <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">What happens, however, if
that boulder rolls right over the FED and anything else you put in its way.
It’s like the old Chaka Chan and Rufus song: “Once you get started, oh it’s
hard to stop”. Inflation isn’t something you want to see gaining speed quickly.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">Big Difference of Opinion<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;">There are those economists
sounding the alarm based on the factors previously cited and the movement in
the 10-year treasury yield curves. But Chairman Powell and other economists in
the Biden administration say “Move along, nothing to see here”. Of course, they
can’t both be right. So, hope for the best, but be prepared for the worst. <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;"><o:p><span style="background-color: #e0e0e0; color: #333333; font-family: Verdana, sans-serif;">This post originally appeared in the FTR blog. For more information on FTR, the leader in commercial freight analysis and forecasting: </span><a href="http://ftrintel.com/" style="background-color: #e0e0e0; color: #666699; font-family: Verdana, sans-serif;">FTRintel.com</a> </o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%; mso-fareast-font-family: Arial;"><o:p> </o:p></span></p>Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-67990721859553148092021-02-24T16:19:00.001-08:002021-02-28T08:16:24.450-08:00If You Start Me Up - Restarting the Industrial Economy <p> <span face="Arial, sans-serif" style="font-size: 14pt;">When the economy was in lockdown there was a strenuous
debate on what would happen when the lockdown ended. One argument was the
economy would stay in recession for months before gradually recovering. This view
supported the case of preserving the lockdown since there was little benefit to
opening back up. “You can’t just turn the economy back on like a light switch”,
they claimed. The opposite view claimed that when the economy reopened, there
would be a “V” shaped rebound, with the economy taking off like a rocket. This
argument supported opening the economy up fully and immediately, despite the
health risks.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="line-height: 107%;"><span style="font-size: 14pt;">As it turned out both sides were wrong, or at least only partially
correct. After the fifty governors started reopening their state’s economies to
one degree or another, economic activity jumped, but it wasn’t a capital “V”
recovery. It was more like a lower case “v” recovery. This is because
manufacturing has been lagging compared to the robust comeback in the consumer
goods sector. When that proverbial light switch was turned on, the demand side
of the consumer economy snapped right back, except for those contact-service
industries. Demand also jumped on the industrial side but it is hard to gauge
due to the</span></span></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-NmwMeysLQl4/YDbsWPT3M_I/AAAAAAAARDA/krb32wv_Y58epAXfDHR5v3x_OKZ76vHBQCLcBGAsYHQ/s2048/jagger4.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1365" data-original-width="2048" height="149" src="https://1.bp.blogspot.com/-NmwMeysLQl4/YDbsWPT3M_I/AAAAAAAARDA/krb32wv_Y58epAXfDHR5v3x_OKZ76vHBQCLcBGAsYHQ/w224-h149/jagger4.jpg" width="224" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">If you start it up!</td></tr></tbody></table><span face="Arial, sans-serif" style="line-height: 107%;"><br /><span style="font-size: large;"> supply factors discussed later. </span><span style="font-size: 14pt;"><o:p></o:p></span></span><p></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Consumers who were able to maintain their income, spent
heavily on goods and non-contact services. In many cases, they had even more
disposable income due to government stimulus checks. It was relatively easy to
restart the export goods pipeline, so easy the ports have been backed up for
weeks as containers arrived.<o:p></o:p></span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">Manufacturing Lags<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">It is much more difficult to jump start the industrial side
of the economy. Factories were shut down for weeks. Some of these factories had
never been idled except for a few days at the end of the year for holidays. There
are startup and maintenance issues with some types of equipment. Workers need
to be recalled, and material and parts inventories need to be replenished.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">In addition, there were significant health factors involved
in restarting the factories. Social distancing, disinfecting, contact tracing
and quarantines all impacted productivity. Some workers declined returning to
factory jobs due to personal or family health concerns. While many employees
switched to working at home, this is not an option for production workers. There
is also a major issue with government stimulus and extended state unemployment
benefits providing a disincentive for reentering the workforce. In some states,
the hourly unemployment benefit is close to or greater than the average factory
wage. This is causing a severe worker shortage in certain industries. <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">There are also problems acquiring imported parts. Mexico
remained on lockdown weeks after the U.S. restarted. Overseas producers
rebooted more quickly, however; the U.S. ports were flooded with containers of
restocking consumer goods. This is causing gridlock and delaying the delivery
of key industrial components to manufactures for weeks.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">All these problems resulted in a dysfunctional supply chain.
There are steel, aluminum and wood shortages, among others. Even computer chips
for autos and trucks are scarce. There are component shortages in many
industries which are slowing production and raising prices. My sources tell me
that the problems are intensifying in February, with no relief in sight. One
manufacturing expert says “So the supply chain has basically dissolved.” It’s
difficult to determine what the true demand is coming out of the lockdowns, but
it is readily apparent that we have a supply chain quagmire, the likes of which
this country has not experienced since WWII. <o:p></o:p></span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">A Wide Gap Between Consumer Demand and
Industrial Supply<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The great disparity between the rebound in consumer market
versus industrial is illustrated by comparing orders for van trailers, those
hauling consumer goods, and those for flatbed trailers, used for transporting
industrial goods. For the 2020 September-December time period, van orders were
up an astounding 160% over the same period last year. Flatbed trailers were up only
31% (still respectable).<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The good news is that flatbed orders have shown a
noticeable improvement starting in November and are accelerating in 2021. The
ISM PMI for manufacturing remains at high levels indicating that demand is
strong for manufactured goods and is growing. Now supply just needs to catch
up.<o:p></o:p></span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The Future for The Industrial Sector Looks
Bright<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">The supply chain clog will be cleared at some point due to
the laws of economics and the profit incentives of free markets. It could take an
extended time since conditions are still worsening. The vaccine should lower
infection rates and allow many people to return to the workforce, including
factory jobs. Also, as state unemployment benefits run out, the job numbers
could spike. This should drive down unemployment, and with the reopening of the
travel and hospitality sectors, give a welcome boost to GDP.<o:p></o:p></span></p><p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;">This post originally appeared in the FTR blog. For more information on FTR, the leader in commercial freight analysis and forecasting: <a href="http://FTRintel.com">FTRintel.com</a></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 107%;"><o:p> </o:p></span></p>Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com1tag:blogger.com,1999:blog-3082934253265791360.post-3314136336547441822020-01-21T16:31:00.000-08:002020-01-21T16:31:12.669-08:00In 2020, 20K May Be The Key Number For Class 8 Trucks<br />
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">The current
state of the Class 8 truck market has fleets carefully evaluating their truck
needs for the next few months and placing orders for delivery within that
timeframe. OEMs can easily schedule production to deliver on time and suppliers
are having few problems keeping pace. <span style="mso-spacerun: yes;"> </span>The Class 8 market is currently operating as a
normal industry, with demand and supply in close balance.</span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-7DX4F9i2ej0/XieWljvvjqI/AAAAAAAAOqc/SrVC85qtd1YSTTWw-7Czwvm6o6FULaXigCLcBGAsYHQ/s1600/truck.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="534" data-original-width="800" height="133" src="https://1.bp.blogspot.com/-7DX4F9i2ej0/XieWljvvjqI/AAAAAAAAOqc/SrVC85qtd1YSTTWw-7Czwvm6o6FULaXigCLcBGAsYHQ/s200/truck.jpg" width="200" /></a></div>
<o:p></o:p><br />
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">However,
this situation is also highly abnormal, since Class 8 trucks are one of the
most cyclical industries in the entire economy. When the freight market is
growing, fleets must forecast how many trucks they will need in the future,
sometimes as far as a year ahead, and order accordingly. When the freight
market is receding, fleets must decide how many older units they can afford to
replace, based on declining revenues, and reduce orders accordingly.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">There have
been a few years where production has been near replacement demand levels,
estimated at around 240,000 units. Weak GDP and freight growth are typical
during those years. <span style="mso-spacerun: yes;"> </span>But there is still
some cycling, as shipments start below replacement demand levels at the
beginning of the year and then rise above them at the end. So the market still
cycles, and doesn’t remain right at replacement levels for very long. Also,
orders in these years tend to follow traditional trends as well, higher in Q4
and lower in Q3. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;">How We
Got Here<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Class 8 orders
set a record at an astounding 497,000 units in 2018.<span style="mso-spacerun: yes;"> </span>Freight growth surged in 2017 and kept on
going in 2018. Fleets did not expect the jump in business and there was a
shortage in trucking capacity. The ELD mandate reduced overall productivity,
exacerbating an already bad situation. <span style="mso-spacerun: yes;"> </span>Rates spiked as service levels tanked.
Carriers desperately needed more trucks, but OEMs and suppliers ran out of
manufacturing capacity, intensifying the shortages. As freight continued to
grow, the big fleets began ordering for 2019 deliveries in the summer of 2018. Just
under 53,000 orders were placed in July 2018, traditionally the weakest month
of the year. This was followed by a record 53,300 orders placed in August.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><span style="mso-spacerun: yes;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">OEMs were
able to find enough workers to ramp up build rates and suppliers resolved most
of their issues, leading to production of over 340,000 trucks in 2019, a record
for a year not impacted by an emissions mandate pre-buy. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Orders
slowed significantly in 2019 because most of the orders for delivery in that
year were placed between July and December (estimated at 225,000).<span style="mso-spacerun: yes;"> </span>Orders in January – September 2019 averaged a
paltry 13,300 units a month; volumes more likely seen during a recession even
though economic growth </span><span style="font-size: 14pt;">continued.
But you can’t evaluate 2019 orders without taking the record set in 2018 into
account. You need to look at 2018-2019 together. Orders averaged 28,000 units a
month over the two-year period. For 24 months orders were 40% over replacement
demand level (20,000 units a month), fueling two terrific production years for
Class 8 trucks. Freight growth stalled in 2019, but production remained robust
for much longer than expected because total hauling capacity just caught up
with freight volume.</span></div>
<div class="MsoNormal">
<span style="font-size: 14pt;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;">The Great
Reset Is Here<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Fleets
traditionally begin ordering for the following year in October. Under normal conditions,
orders in the fourth quarter are the highest quarter by far. Large fleets
evaluate their equipment needs for the following year in the summer and send
their quantities and specifications out to the OEMs for pricing. They then
place their requirement orders in Q4, often issuing orders out in a 12-month
window. Medium-sized and smaller fleets often order in quantities based on what
the big fleets do.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">However,
conditions this year are much different. The big fleets are determining what
older trucks they are going to replace in Q1 and just placing orders for those.
The rest of the market is following their lead and placing smaller orders for
shorter delivery times.<span style="mso-spacerun: yes;"> </span>Q4 monthly
orders were 22,000, 17,600, and 20,000, for an average of just under 20,000, which
is equal to replacement demand. As mentioned before, this is consistent with
many other industries in a low-growth environment, but what has caused this
abrupt change in typical ordering patterns for Class 8 trucks?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;">Caution
Reigns Supreme <o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">This is not
a poor business environment. Freight levels are high after a couple of years of
vibrant growth. Rates took a hit from the high prices in 2018 but have started
to recover some. There is plenty of freight to haul, so well-managed fleets
will be profitable, as poor-manage fleets go bankrupt due to the slowing of
freight growth. The economy keeps growing and a recession is unlikely in 2020.
However, it is a highly uncertain environment, with much downside risk. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">The key risk
factors are:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-size: 14.0pt; line-height: 107%;">The
economy has slowed from its strong performance over the last couple of years. FTR
forecasts GDP growth at 1.7% for 2020, down from 2.3% in 2019.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-size: 14.0pt; line-height: 107%;">The
industrial sector of the economy is weak. The ISM manufacturing index is at
46.8%, indicating manufacturing is contracting. The index is at its lowest
level in ten years.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-size: 14.0pt; line-height: 107%;">Class
8 truck loadings are expected to be basically flat in 2020, at a 0.9% growth
rate.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-size: 14.0pt; line-height: 107%;">There
are continuing tariffs and trade wars. Yes, it does look like some conflicts
are calming down, but one tweet can change everything in a moment.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-size: 14.0pt; line-height: 107%;">Business
investment in most sectors of the economy has pulled back due to this same
uncertain environment.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-size: 14.0pt; line-height: 107%;">There
is a caustic political environment and there is an impeachment trial.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;">20K in
2020?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Under this
highly uncertain environment, there is no speculative ordering of Class 8
trucks. This is like a mountain climber on shaky terrain. One careful step at a
time. Orders are for only what is needed – out for one quarter at a time.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Usually,
when the market hits equilibrium, where supply and demand are balanced, it
doesn’t remain there for long, because demand is almost always cycling up or
down. But this time is different. Uncertainty may even increase before it
decreases because the upcoming election could be between candidates with
starkly different business and economic philosophies. Throw in the possible
conflict with Iran and the ledge gets even shakier.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Flat freight
growth means fleets do not need to expand. A growing economy and high freight
volumes enables them to replace old units with minimal risk. So, we are left
with only replacement demand, estimated to be around 20,000 units a month. </span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: 14.0pt; line-height: 107%;">Therefore,
the Class 8 market is in a holding pattern. Orders and build rates may stay
locked in this range for a while. That means ironically, we are stuck in the
20,000-truck a month range in the year 2020. It could be the most stable Class
8 year ever.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-32768256046042384182019-12-17T16:21:00.000-08:002019-12-17T16:21:48.885-08:00The 2019 Class 8 Truck Market Was A Thriller<br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">You could make a movie out of the dramatic Class 8 market
in 2019. But it would be a terrible movie. And a movie we have watched before.<o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It Was the Best of Times<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; line-height: 107%;"><span style="font-size: 14pt;">The movie begins with great joy in the industry. The
freight surge in 2018 </span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-XA8qgVkNqfo/XflwvRnwzDI/AAAAAAAAOZc/vWLwm0X3HfEd9FAZopv3Pu3dtGgabaiNgCLcBGAsYHQ/s1600/popcorn-.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="150" src="https://1.bp.blogspot.com/-XA8qgVkNqfo/XflwvRnwzDI/AAAAAAAAOZc/vWLwm0X3HfEd9FAZopv3Pu3dtGgabaiNgCLcBGAsYHQ/s200/popcorn-.jpg" width="200" /></a></div>
<span style="font-size: large;">creates unprecedented demand for trucks (not counting the
emissions pre-buy of 2006). OEMs are cranking out trucks as fast as possible.
Suppliers are keeping up after disruptions in 2018. Dealers are finally getting
stocks, and they are flying out the door. Fleets are putting the trucks into
service, and profits rise. Factory workers, truck drivers, investors, and every
industry stakeholder are happy, happy, happy.</span><span style="font-size: 14pt;"><o:p></o:p></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">But Then Things Change <o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">By the end of the year, freight growth stalls. Fleets have
enough trucks to handle the available freight. Production at the OEMs slows.
There are layoffs at both the OEMs and suppliers. Trucker wages, especially
owner-operators, fall. The weaker performing fleets go bankrupt. Fleets pull back
on orders for next year due to the high degree of economic, trade, and
political uncertainty. The industry people are all sad, and nervous about the
future as the movie comes to a close at the end of December.<o:p></o:p></span></div>
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<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">And We’ve Seen This Movie Before<o:p></o:p></span></b></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Class 8 truck market is one of the most cyclical
industries in the entire economy. And while this downturn is similar to
previous ones, it does have some unique features. The 2019 FTR forecast was for
a robust first half of the year, a stepdown in Q3, and a further erosion in Q4.
<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The build in the first half of 2019 was even higher than
our lofty numbers. I realized at the FTR June forecast meeting in mid-May, that
something was amiss. We had the market softening in Q3, but there were no signs
that production was slowing down much at all, a short six weeks prior to July. And
Q3 did ease, a mere 3%, but at almost 93,000 units, it is still one of the top
quarters in history.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">But the inklings about a Q4 drop started in July. Fleet
confidence started to fade as freight growth slowed. Spot rates dipped, as well
as profits. OEM backlogs were plummeting due to lower orders and elevated
cancellations, as fleets pulled orders out that they had placed many months
ago. Supply of trucks was finally catching up with demand, which always
happens, but this time it was more sudden. There was talk that OEMs were
considering drastic Q4 cuts, even as Q3 production remained robust. I wondered
aloud during an August meeting, “What are the OEMs going to do? Build like
crazy for nine months and then just shut the whole thing down?” It sounded
crazy when I said it, but it doesn’t sound crazy right now.<o:p></o:p></span></div>
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<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Roller Coaster Was Wild This Time<o:p></o:p></span></b></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">We’ve experienced wild demand swings in the industry
before, but nothing like this time. For example, in the last 12 months
(December 2018 – November 2019) Class 8 orders have equaled 180,400. In the
previous 12- month period (December 2017 – November 2018) orders were 513,500. And
of course, the economic shock, the extreme outside factor, the black swan which
cause this precipitous crater was, was, …. Oh yeah, there wasn’t one. This is
just the cyclical nature of the Class 8 market.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Production is expected to drop around 30% from Q3 to Q4.
Once again, the big economic hit is …… none. Although there are enough economic
and environmental pressures present to increase uncertainty entering 2020:<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">GDP growth falling to 0.9% in Q1.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Freight growth of only around 0.5% for most of 2020<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Manufacturing growth in decline for four
straight months, probably headed for a “manufacturing recession” (six months or
more under 50 ISM), similar to 2015-16.<o:p></o:p></span></div>
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</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Uncertainty due to trade wars, tariffs, etc.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Political turmoil in the news daily.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The upcoming 2020 election which will slow
business investment as the day approaches. The expected contrast in business
philosophy between the candidates will amplify this effect.<o:p></o:p></span></div>
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<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Recession Talk?</span></b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Several months ago, there were many economists raising the
possibility of a recession in 2020. There wasn’t much support for these forecasts
and that talk died down quickly, with the general consensus being no recession
is imminent.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">However, I think there is a better recession argument to be
made now based on the factors listed above. Also, the Class 8 market is a
leading indicator, and the order numbers for October and November do signal
possible trouble. I don’t think a recession is coming in 2020, but the
conditions are similar to 2016 when economic growth nearly stalled out. It
would not take much of a bigger dip or an outside force to push the economy
under water for a short period. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Based on October and November orders, it appears Q1
production will start off weak. If manufacturing begins to recover in February,
it will stabilize the Class 8 market and orders will improve. Hopefully, the
2020 version of the movie is not a horror film. <o:p></o:p></span></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-61067663871512521012019-10-22T17:29:00.000-07:002019-10-22T17:29:44.282-07:00What is the Trade War’s Impact on U.S Manufacturing?<br />
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">(<i>This post appeared on my work blog in early October. Just a few days later there was progress on the trade talks. Conclusion? Both Trump and the Chinese read my blog!)</i></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">I regret to inform you that we are involved in a trade war.
I regret it, because months ago I told my colleagues to calm down, proclaiming
there would be no trade war. I believed that both China and the U.S. realized
that a trade war would be too damaging to both countries and, therefore, they
would strike some sort of deal. I even replaced the term “trade war” with
“trade conflict” in our company reports, when the countries were just in the
threatening stages. I don’t even like the term. It’s not like it’s a real war,
but that’s the term we use. So, I admit it: I was wrong, so wrong.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">What impact is this “war” having? When it began, the media
went into panic mode, warning that the economy would be severely affected, with
some even predicting a repeat of the Great Recession. That hasn’t happened yet
because most journalists do not understand economics. Economics is basically
the study of how people react to changes in order to maximize their benefit.
Most dire predictions about the economy assume that people, and companies, will
not change their behavior due to the tariffs. And this is absolutely false.
People and companies adapt and make choices based on the new supply and prices
of goods. Therefore, it is almost impossible to predict the impact of the
tariffs as they are happening.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The business response to tariffs can be complicated. Take
the real case of a component supplier to the commercial vehicle industry facing
a 25% tariff on goods produced at their China factory. If you assume all costs
get passed on, the product cost rises by 25%. They raise their price by 25%,
which means truck and trailer OEM’s raise their prices to the dealers, who
raise their price to the fleets, who charge more in freight rates, which results
in higher prices to consumers. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">However, this supplier, in this case, shifted its
production to Vietnam, resulting in just a 15% increase in costs. But the
changes didn’t stop there. Aftermarket customers balked at buying products from
the new Vietnamese factory until the quality could be proven, leading the
company to increase production at its U.S. factory. The supplier was also limited
in how much it could raise prices due to market competition. So, the company is
making less profit on roughly the same amount of sales, and there is minimal
impact on down the supply chain. While less profit is not good, it is not
catastrophic to the economy.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Also, I recently read an article about the effects of the
tariffs on a company that produces a consumable sporting goods product in China.
The company had achieved a dominant market share by utilizing cheap Chinese
labor to slash costs. It could then price its product under the competition,
and yet still achieve a higher margin. Now, due to the tariffs, its cost is
more than the competition, and it can’t raise prices due to the competitive
nature of the market. The company officer was whining excessively about how the
tariffs were eating into his profits. Pardon me, but it was your decision to
produce in China, which provided enormous profits and allowed you to crush the
competition. And now you are complaining that your profits are no longer
enormous. I just can’t feel any pity here. But this company is absorbing all
the impacts of the tariffs, and I am not paying a penny more for this item at
the store.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">But the tariffs are having an impact. The farmers and other
“targeted” industries are obviously suffering. It should be noted that these
sectors are hurting as a result of Chinese actions. Instead of negotiating a
deal, the Chinese choose retaliatory, targeted tariffs. However, I am not going
to debate the merits or hazards of this trade war here. But how are the tariffs
impacting the economy?<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Two areas where the tariffs are causing problems are
construction and manufacturing. Total Construction Spending was up just 0.1% in
August, and June’s and July’s tepid numbers were revised downward. Year-to-date
spending is down 2.3% versus the same period in 2018. How do tariffs impact
construction spending? The tariffs increase economic uncertainty, and this
decreases business investment. Business investment is an important element to
overall economic growth, and obviously essential to the construction market.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Manufacturing is also displaying weaker numbers. The ISM
(Purchasing Managers) Index for manufacturing was 47.8 in September, the lowest
value since 2009. It has been below 50 (indicating manufacturing activity is contracting)
for two months in a row. However, the index had been declining before the heavy
tariffs kicked in, so what is the impact of the tariffs alone?<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Let’s compare the last time the ISM index cycled down in
August 2015, with this cycle in which began in August 18 (see graph). The ISM
in this cycle was stronger until we hit May 2019. And in August the downward
slope of the line increased. Therefore, a rough estimate of the impact of the
tariffs on manufacturing is the yellow area on the graph. It indicates the
tariffs began having a noticeable effect in May and it intensified in August.</span></div>
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<a href="https://1.bp.blogspot.com/-weqVB2k9EUU/Xa-dvqkl9BI/AAAAAAAAN_s/4vM2UXPsez0tdu0SEdRM6_maFu-72SYPgCLcBGAsYHQ/s1600/ISM%2Bgraph%2B%25281%2529.PNG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="496" data-original-width="798" height="247" src="https://1.bp.blogspot.com/-weqVB2k9EUU/Xa-dvqkl9BI/AAAAAAAAN_s/4vM2UXPsez0tdu0SEdRM6_maFu-72SYPgCLcBGAsYHQ/s400/ISM%2Bgraph%2B%25281%2529.PNG" width="400" /></a></div>
<o:p></o:p><br />
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The economic data from China is even more dire, with a
report indicating China’s economy is growing at its slowest pace in 27 years. I
may have been wrong about if a trade war would start, but I was correct about
the impact to both countries.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Therefore, this conflict needs to end soon. The uncertainty
is beginning to choke the economy, which would still be doing surprisingly well
without this anchor. We may be on our way to a manufacturing recession (in my
book, it takes six months at an ISM of 50 or below, and we are currently at
two). If China’s GDP can recover, it helps the world economy, which leads to
more U.S. exports.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">There is still a lot of money sitting on the sidelines,
waiting out the war. As soon as economic peace is established, this cash will
come pouring back into the economy, providing a temporary boost. Which is
exactly what we need right now.<o:p></o:p></span></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-16698761453979438682019-07-17T05:23:00.000-07:002019-07-17T05:23:01.681-07:00It’s Time for an Economic Celebration!<br />
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<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The U.S. economy is setting a record this month for
achieving the longest period of growth in its history. The economy has been
growing for 121 months, breaking the previous streak from the 1990s. This
doesn’t surprise me. Everything about this recovery has been unusual, so the
fact that it is unusually long is par for the course.<o:p></o:p></span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">However, the reason this recovery has run so long is
because the hole we had to climb out of was so deep. It’s called the Great
Recession, as opposed to the recession of 2008-2009, for a reason. <o:p></o:p></span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">It lasted 19 months<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">It’s regarded by some as the second worst
downturn of all time<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The unemployment rate reached 10%<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Real GDP fell 4.3%<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">There was a global financial crisis<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">In trucking, it took over 10 years for freight volumes to
reach their pre-recession levels. For commercial vehicles, the drop in Class 8
truck production from peak month to trough was 80% and 81% for trailers. Our
industry is one of the most cyclical in the entire economy and suffered greatly
from the downturn.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Some analysts are downplaying the length of the recovery
because of the weakness of the growth rate over time. The average annual GDP
growth rate during this expansion is a paltry 2.3%, which puts it dead last on
the list of economic expansions since 2019 (the next lowest is 2.7%, in the 1990s).<span style="mso-spacerun: yes;"> </span>I believe the substandard performance is
mostly the result of the severity of the crash.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Imagine a cyclist is zooming down the road, hits a bump and
crashes her bike.<span style="mso-spacerun: yes;"> </span>As a result, she
sprains her knee. How long before she is biking again? After some rest and pain
medication, she is back riding at half-speed in a few weeks. In a couple months,
she is back at full speed, as if nothing ever happened. (Sounds like the 2001
recession).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">But then another cyclist is gliding through traffic and
gets hits by a huge SUV. He ends up in intensive care with serious injuries,
including several broken bones. His recovery is excruciating slow, with minor
incremental progress. He moves out of intensive care to the hospital and
eventually back home. The bones heal and physical therapy begins. Maybe he gets
back on the bike in a year, struggling to pedal slowly. Because he is a dedicated
cyclist, he eventually makes it back to full speed, but it takes years.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Those pessimistic analysts forget just how devastating the
Great Recession was. If you were one of the 10% unemployed, searching for work
in one of the worst job markets ever, you don’t forget.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">From the optimists, there is much political debate about
who gets credit for the record recovery. In my view, the Obama administration
did a great job climbing out of the economic pit. It got everything stabilized
and held tight reins on the economy, so it would not fall back into the hole.
However, at some point you could stop climbing and start running. Unfortunately,
it’s difficult to transition from climbing to running. It takes different
skills and policies, and they remained stuck in one gear.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The Trump administration comes in and can clearly see we
should now be running and not climbing any more. They put some track shoes on
the economy, gave it a push, and shazam! So, the Obama Administration primed
the pump for several years, and the Trump people pumped away. See there is
enough credit to go around. Can’t we all get along?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Dark Clouds?<span style="mso-spacerun: yes;">
</span><o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><span style="mso-spacerun: yes;"><br /></span></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Nothing lasts forever, not even the longest economic
recovery in history. The last two recessions occurred as a result of shocks,
bubble bursts if you will, in dot-com and housing. There are no bubbles visible
now, but you never really see the SUV coming at you until it’s too late,
right?<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><span style="mso-spacerun: yes;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Yes, there are plenty of dark clouds headed our way. The
economy is slowing after hitting a peak. GDP is expected to dip to around 1.5%
in Q2. Will it continue to descend, or will it stabilize? It would help
immensely if trade deals with China, Mexico, and Canada get finalized soon.
This would provide a momentary boost to the economy, enough push that I don’t anticipate
any serious economic problems until late in 2020.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Party Time!<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; line-height: 107%;"><span style="font-size: 14pt;">I don’t expect economists to celebrate this milestone,
because economists</span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-3DpXNq2KNiU/XS8Sog600vI/AAAAAAAAM_M/2Drr3u7D-v4k0IVUqTmQKwM6dg-Z7qhmgCLcBGAs/s1600/fire%2Bworks.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1063" data-original-width="1280" height="165" src="https://1.bp.blogspot.com/-3DpXNq2KNiU/XS8Sog600vI/AAAAAAAAM_M/2Drr3u7D-v4k0IVUqTmQKwM6dg-Z7qhmgCLcBGAs/s200/fire%2Bworks.jpg" width="200" /></a></div>
<span style="font-size: large;"> don’t celebrate much at all. But for the rest of us, let’s
party! We had to go through the misery of the Great Recession, we deserve to
celebrate this 10-year anniversary (plus a month) of its passing. Raise your
glass! Shoot off some fireworks! Here’s to 121 months of economic growth</span><span style="font-size: large;">!</span><o:p></o:p><br />
<span style="font-size: large;"><br /></span>
<span style="font-size: large;"><span style="background-color: #e0e0e0; color: #333333; font-family: arial, sans-serif; font-size: 14pt; line-height: 19.97px;"><i>This post first appeared on the FTR website with minor changes here.. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span><span style="background-color: #e0e0e0; color: #333333; font-family: arial, sans-serif; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i>.)</i></span></span><br />
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-84142211193518682862019-06-23T16:00:00.000-07:002019-06-23T16:00:43.914-07:00We’re Addicted To Cheap Chinese Goods<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">In the early 90’s, the Clinton administration provided trade
benefits to China. There was strong criticism against these moves based on
China’s human rights violations. However, President Clinton argued that expanding
trade would lead to better relations with the Chinese and eventually better
conditions for the Chinese people.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">As trade with China increased, the Clinton economic team
realized something significant; they could achieve economic growth without increased
inflation. Usually, economic growth spurs inflation, which the Fed tries to
control with higher interest rates. This can eventually lead to recession. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">However, in the Clinton 90’s, the economy grew without a recession
because we were able to “import deflation” from China. The toaster that priced
at $10 (made in Missouri) could now be purchased for $8 (made in China). Add up
the savings from a variety of everyday purchases and you are stretching the
family budget. Multiply the savings over millions of families, and poof! – much
of the inflation in the economy disappears.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Yes, the toaster jobs also began to disappear in Missouri,
but the dot-com boom was just heating up, so high-tech jobs were growing. This
began the transition of the U.S. from a low-tech workforce to a new, high-tech
workforce, a problem we still struggle with today.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">You may consider “grow the economy and import deflation” a
short-term strategy with long-term difficulties. However, in U.S. political
cycles, you leave after eight years. So, whatever consequences are created
become someone else’s problem.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The convenient time for this policy to be evaluated,
controlled, modified, etc., would have been at the beginning of the Bush II
administration. But, the dot-com bubble burst in 2000. Whoops! – there went many
of those dot-com jobs, and a recession began in March 2001, followed closely by
the events of September 11. Taking any action at that time which disrupted the
economy or increased inflation (if you stopped importing deflation, for example)
could have proved disastrous. So, the Chinese policy continued.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; line-height: 107%;"><span style="font-size: 14pt;">In 2000, Congress did pass legislation promoting more
Chinese trade and, in</span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-CXO2ux74yx4/XRAELlK0_QI/AAAAAAAAMxY/Sd8mZ2ym71MsVB2myaoGOu5uRI_4gt1_gCLcBGAs/s1600/Container%2Bship.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="361" data-original-width="643" height="177" src="https://1.bp.blogspot.com/-CXO2ux74yx4/XRAELlK0_QI/AAAAAAAAMxY/Sd8mZ2ym71MsVB2myaoGOu5uRI_4gt1_gCLcBGAs/s320/Container%2Bship.jpg" width="320" /></a></div>
<span style="font-size: large;"> 2001, China was admitted to the WTO (World Trade Organization).
The hope was that this would lead to China buying more U.S. goods, thus reducing
the now-ballooning trade deficit. But this move only accelerated the import of Chinese
goods. The Economic Policy Institute estimates that 3.4 million U.S. jobs have
been lost since the WTO action. We may have imported deflation, but we also
exported production jobs. Somewhere along the line, that Missouri toaster
factory was toast.</span><span style="font-size: 14pt;"><o:p></o:p></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Chinese imports increased through the aughts (00s).
Economists were confused about how the economy could be doing well with U.S.
employment growth so tepid, but it looks like the trade policy is partially to
blame. With manufacturing declining and the dot-com sector slow to recover,
there were few places to invest capital, so everyone poured massive amounts of
money into the housing market.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">After the housing bust and Great Recession, the new Obama
administration could also not risk disrupting Chinese trade. The economic
recovery was very fragile for a few years and never great during the entire
eight years. So, the Chinese goods kept flowing. The Chinese were fortunate that economic and
world calamities prevented U.S. trade policies from being critically reviewed,
which enabled the cheap Chinese goods to keep flowing to U.S. consumers for
over 20 years.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Trump administration reviewed the numbers and wondered
how we ever got into this precarious position. Today, we find ourselves in a
trade war, which involves much more discussion about intellectual property and
opening Chinese markets to U.S. goods than about slowing the flow of products
into the U.S. Why? We might as well face
it – we’re addicted to cheap Chinese goods. </span><span style="font-family: Arial, sans-serif; font-size: 14pt;">Yes, we love those low prices at Walmart
and online too! We have been buying the stuff for 25 years and we are hooked. This
is surely the “new normal”.</span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">You might have thought the renewed interest in Chinese
trade would have revived the debate about human rights abuses. How about those
advocates protesting exploitation of Asian workers? What about the argument
that buying Chinese goods enriches a communist regime that may do us harm in
the future? Nope, nope, nope. Crickets! Why? We are addicted to Chinese goods
like a junkie on crack.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">And the addicts are agitated because their “fix” might
increase in price 10% due to the tariffs -- a 25% increase would be horrible! Of
course, the simple calculations for the tariff’s impact on prices are always
overstated due to the law of supply and demand and the fact that consumers will
seek substitute goods.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">In this highly politicized culture, the Chinese tariffs
will either destroy our economy or have very minimal impact, depending on your
attitude towards Trump. Of course, the truth is somewhere in between. However,
the tariffs and trade negotiations have greatly increased business uncertainty,
which is always detrimental to the economy. Therefore, it is beneficial to the
U.S., China and, yes, the cheap-Chinese-goods addicts for this trade deal to be
signed as soon as possible.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<i><span style="background: #E0E0E0; color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">This post first appeared on the FTR website. FTR
is the leader in analyzing and forecasting the commercial transportation
industry. For more information on FTR reports and services, please </span></i><span style="background: #E0E0E0; color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/"><i><span style="color: #666699;">click here</span></i></a></span>Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-48641988079948740632019-04-24T06:59:00.000-07:002019-04-24T06:59:20.695-07:00When Do We Need To Fear The Next Recession?<br />
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; line-height: 107%;"><span style="font-size: 14pt;">Imagine you are in a crowd of people cheering on a runner
in a long-distance race. Your contestant is running at a hearty pace and is
winning. But then you notice their speed has slowed some. The athlete is still
running at a steady pace, and is still winning, but just not by as much. Some
spectators believe this </span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-I8Pf67njBVQ/XMBpw1qWdYI/AAAAAAAAMfQ/4NFgBAI8e5wBkD7NfzDkAZ7d9QFQl1g8wCLcBGAs/s1600/endurance-female-fit-40751.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="851" data-original-width="1280" height="132" src="https://1.bp.blogspot.com/-I8Pf67njBVQ/XMBpw1qWdYI/AAAAAAAAMfQ/4NFgBAI8e5wBkD7NfzDkAZ7d9QFQl1g8wCLcBGAs/s200/endurance-female-fit-40751.jpg" width="200" /></a></div>
<span style="font-size: large;">is evidence the runner is exhausted and will soon be
losing. Some are optimists and believe the competitor is just taking a break
and will be back up to speed soon.
Others see this as just the normal behavior in running the race.</span><span style="font-size: 14pt;"><o:p></o:p></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">And such is the state of the U.S. economy. It ran at a
hearty pace in 2018, but is expected to downshift slightly this year. Because
the economy is slowing, several economists and analysts are predicting a
recession will occur later this year.<span style="mso-spacerun: yes;"> </span>Naturally,
this has created concern and discussion in our industry. It is the topic I have
been most asked about recently. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The recession proclaimers warn of the economy peaking, trade
uncertainties, stock market volatility, an inverted yield-curve, etc.<span style="mso-spacerun: yes;"> </span>This is causing some concern, so let’s look
at the key issues:<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The
economy has peaked, so we are certainly on our way down<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoListParagraphCxSpMiddle">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Yes, it looks as if the peak growth
quarter was 2018Q2 at 4.1%. and has eased down from there. However, GDP had
also peaked in 2014, averaging 5% over two quarters, and the economy slowed
after that, but did not go into recession.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">But
the economy is over-heated, so it will cool rapidly<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoListParagraphCxSpMiddle">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">GDP growth for the year of 2018 was only
3%. This is what was considered “normal” growth for a long time, until we
experienced 2% growth in recent years. The 2019 GDP FTR forecast is 2.6%, not
exactly a deep freeze.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">In addition, inflation is surprisingly
mild, coming in at 1.9% in 2018, versus 2.1% in 2017. Usually the inflation
rate is higher and rising before a recession starts. The Fed then must raise
interest rates due to inflation and this puts the brakes on the economy.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";"> </span></span></span><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The
stock market slide in December signaled we are doomed<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoListParagraphCxSpMiddle">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Many analysts believe the sell-off was due
to a rookie mistake by the new Fed head. His misguided statements about future
interest rate hikes created a market panic. He made backtracking comments in January
- and voila! – the stock market is back on track.<span style="mso-spacerun: yes;"> </span>False alarm – this time.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The
yield curve has inverted</span></b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoListParagraphCxSpMiddle">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The indicator is tracked closely by many respected
financial analysts. This is cause for concern, but perhaps more in the long-term.
The other thing to consider is that many historical economic indicators were
“shook up” by the Great Recession and are not as reliable as they were before. <o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The
unemployment rate has bottomed out<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoListParagraphCxSpMiddle">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">This is also cause for concern, but the
employment statistics were impacted greatly impacted by the Great Recession and
still cannot be fully trusted. There is still some “slack” in the workforce.
However, it is a fact that many industries are having difficulty finding more
workers. Labor shortages restrict GDP because you can’t produce more if you
don’t have more producers.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";"> </span></span></span><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Tariffs
and trade wars will crush the economy<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoListParagraphCxSpLast">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Until these are settled, they remain a
concern. However, the trade situation is far from the disaster predicted by
many. Let’s assume that even if the impacts of the new trade actions are
negative, that it won’t push the economy into recession.<o:p></o:p></span></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">What
the Truck Equipment Markets Indicate<o:p></o:p></span></b></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Class 8 truck and commercial trailer production is a valid
economic indicator because it is often the first place in the national supply
chain to experience a change in direction. However, it was not a reliable
indicator in 2016. My post in March of 2016 said the Class 8 truck market was
predicting a recession late in 2016. However, GDP was about 1.8% for that time
period, so I whiffed. I whiffed badly. However, it would be highly unusual for
the economy to go into recession until over a year after heavy-duty equipment production
has peaked. Neither Class 8 or trailer build has topped out yet, although this
is expected to happen in the next few months. This would indicate there is no
chance of a recession in 2019.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">So
When, Then?<o:p></o:p></span></b></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">If truck/trailer production peaks in June 2019, the next
recession, barring any wild-card factor, should not begin until October 2020 at
the earliest. And it is important to note in this hyper-politicized
environment, we usually don’t realize a recession has started until we are
several months into it. <span style="mso-spacerun: yes;"> </span>For mild
recessions, sometimes the downturn has ended before we even realized it
occurred. <o:p></o:p></span></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-60930561090438973812019-03-04T08:44:00.000-08:002019-03-04T08:44:37.713-08:00Brick and Mortar – It’s What’s Inside That Matters<br />
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Brick
and mortar are dead …<o:p></o:p></span></b></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">In 2016, demolition of Rolling Acres Mall began. The mall
opened in 1975 on 260 acres on the southwest side of Akron, Ohio. In its
heyday, it featured 140 stores on two levels,1.3 million square feet of retail space,
and 7,500 parking spots.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">However, the mall’s demise began long before on-line
shopping became prominent. Safety and security issues scared shoppers away. The
mall was offered at auction in 2009 and received no bids, and the last retail
store closed in 2013. It took a lot of trucks to haul away all that brick and
mortar when they tore it down.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It is now rumored (there is a name on the proposed
blueprints), that a new Amazon fulfillment center will be constructed on that
vacant land. Amazon fulfillment centers are somewhat more than a million square
feet, so it will be just about the same total flooring as the old mall. Naturally,
it will only be one floor, but stand taller.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Brick
and mortar lives!<o:p></o:p></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">And what will the center be built from? Brick and mortar
are not dead! But it will take considerably less materials to construct the
fulfillment center than to build a mall with 140 separate stores, including five
large anchors. However, this will be a much more efficient use of brick and
mortar due to the spectacular productivity going on within those walls.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Productivity is the key factor. If someone presented a
business case based on Amazon’s system in 1994 (when Amazon started) it would
have been quickly dismissed, because it would have been thought to be
inefficient and unproductive.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">But what about the books? Amazon selling books did not
become profitable until its seventh year. You could say it practiced on books.
Once it achieved a level of operational productivity combined with volume, the
profits began to roll in, and Amazon determined that other products could be
channeled through its system.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">How productive is an Amazon fulfillment center? It has been
reported that the Kentucky operation can process 426 orders every second (read
that sentence one more time). In the old mall, if one shopper were present at every
register in every store (adding a few registers at the anchors) at the same
time and assuming it took two-and-a half minutes to process the transaction
(including 30 seconds waiting in line), the fulfillment center would be 400
times more efficient. If the registers were only in use 45 minutes of every
hour, the fulfillment center is 500 times more efficient and, if you factor in
when the mall was closed at night…whoa, sorry, my calculator just exploded.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Amazon achieves this extreme efficiency by using the most
advanced technology available including robotics and 14 miles of conveyor belts
per center. It has also been reported that it squeezes maximum productivity
from its workforce. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Now thousands of on-line retailers are striving to emulate
Amazon, which had a huge head start and holds a dominant competitive and technological
advantage. The U.S. is in a “warehousing boom” (lots of brick and mortar), as
distribution centers spring up across the country. These centers also are
high-tech because efficiency is critical to being able to generate profits and
compete with Amazon and others. So, inside the walls of the fulfillment center
is the pinnacle of efficiency and productivity; but once those cardboard boxes hit
the outside world, peak efficiency stops. This is because the
transportation/logistics sector is trying to figure out how best to deliver
packages that “final mile.” (home delivery).<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The transportation players should not be faulted for a slower
response. On-line sales have exploded as the baby boomers’ lust for product selection
and customization melded with Millennials’ need for convenience and immediacy. These
are the same factors that influenced sales methods and distribution historically.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Sears catalog, first published in 1894, provided people
with a much wider selection of goods than was available at the old General
Store and was an immediate success. Sears serviced the country out of a
3-million square foot warehouse and made so many efficiency improvements along
the way that Henry Ford studied their processes.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Sears opened its first department store in 1925, which
provided the convenience of having many different products available in one location,
with the immediacy of taking the product home with you rather than waiting
weeks for delivery. This concept was so popular that Sears store sales (more
were opened) exceeded catalog sales in just six years, which I find remarkable
when considering the pace of life back then. It’s probably comparable to the way
Amazon is adding fulfillment centers today.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Digitization has revolutionized the news, music, and many
other industries. The Internet took the Sears catalog and digitized it by a
trillion. (It may not be a trillion, but I don’t have time to count every
individual product sold on-line). And then products were able to be delivered
in days, then a day, and now sometimes in hours. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It’s not surprising that logistics is trying to catch up
with all the various problems that exist with home-delivering a growing number
of packages faster and faster. There are reports of traffic jams in
neighborhoods caused by all the delivery vehicles on the streets. (Wouldn’t it
be great if all the packages were on one truck?) And then there are the porch
pirates. (Wouldn’t it be great if there was a central location for neighborhood
pick-up and delivery.) And there are numerous inefficiencies. For example, my
mailperson delivered a football jersey to me one day at 8:30 a.m. and then
returned to deliver my mail around 1 p.m. in the same van. I think I could have
survived those four hours without the jersey – or anything else for that
matter. (But then I’m not a Millennial.) <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; line-height: 107%;"><span style="font-size: 14pt;">And just as Amazon uses the latest in technology to make
the warehouse most</span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://2.bp.blogspot.com/-bJgEUyhETWw/XH1VpcEUflI/AAAAAAAAMDc/L8EAP3j5vqESnr7biveeAWMt0MG4DpezACLcBGAs/s1600/drone.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="627" data-original-width="700" height="178" src="https://2.bp.blogspot.com/-bJgEUyhETWw/XH1VpcEUflI/AAAAAAAAMDc/L8EAP3j5vqESnr7biveeAWMt0MG4DpezACLcBGAs/s200/drone.jpg" width="200" /></a></div>
<span style="font-size: large;"> efficient, final milers are experimenting with drones,
robots, and self-driving vehicles to deliver packages. Future technologies
might even be developed to solve this specific problem.<o:p></o:p></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Class 8 freight haulers have issues because they must
service both traditional retailers and on-line sellers as the market rapidly
changes. But when all those new warehouses get built, it should make the
logistic system easier to navigate and better than it is now. There is
speculation that the optimal store of the future (free standing) has a
traditional showroom/sales space in the front and a large distribution
center/warehouse in the back.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">But the final mile problems will all get solved. We just
need some time to figure out the most efficient and effective ways to do it.
Why am I so sure of this? </span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Well, history is on our side. At the start of the 20<sup>th</sup>
century, the major catalog retailers, Sears and Montgomery Wards, had a huge
problem in that 65% of the population didn’t have access to their goods and the
infrastructure to fix this didn’t exist. So, after moving the products hundreds
of miles by rail, they couldn’t get them delivered the…, the…, wait for it…,
the final miles. Yep, the goods market had a final mile problem, but eventually
they got it fixed and sales exploded. If our ancestors could figure it out
using the technology of that day, I’m confident we can too. <o:p></o:p></span></div>
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<br /></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com2tag:blogger.com,1999:blog-3082934253265791360.post-13422043885294922082019-01-23T10:26:00.004-08:002019-01-23T10:26:55.903-08:00When Will We See Driverless Big Rigs?<!--[if gte mso 9]><xml>
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<br />
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The question I get asked the most by people inside, and
outside, the industry is: When will there be driverless trucks on the highways?</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">This, of course, is a difficult question because it not
only involves adaptation to technology, but a host of other complicated factors
as well. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">But my answer is this:</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">You will see driverless trucks as soon as the general
population accepts driverless cars. When people are comfortable riding in a
driverless car, then they will not object to a fully-loaded, driverless tractor-trailer
behind them on the highway.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">I realize this is not a specific answer but providing an
exact year at this point amounts to SWAG. It is difficult to calculate an
adoption rate curve because, in addition to economics, there are cultural,
political, and other issues to resolve.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">I believe most people are currently fearful of self-driving
cars. This fear will, of</span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-LMyT1QGNANY/XEixXFLeMEI/AAAAAAAALd8/v-uCETvJl9c1NNHwdj55NCwWelJ0mimAACLcBGAs/s1600/driverless1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="800" data-original-width="1540" height="103" src="https://2.bp.blogspot.com/-LMyT1QGNANY/XEixXFLeMEI/AAAAAAAALd8/v-uCETvJl9c1NNHwdj55NCwWelJ0mimAACLcBGAs/s200/driverless1.jpg" width="200" /></a></div>
<span style="font-size: large;">course, be reduced by all the “self-adjusting/correcting”
options (braking, parking, lane-assist, speed-adjust, etc.) available on newer
vehicles. In addition, there will be public service campaigns trumpeting the
increase in safety provided by self-driving cars. Reduction in accidents,
deaths, and drunk drivers will be the main benefits. Improved traffic flow is
also an expected plus. </span><br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">And traffic safety is of growing importance as millions of
baby-boomers with diminishing skills share the road with the texting
Millennials. Throw in increased marijuana legalization, and we all may end up
demanding self-driving cars.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Personally, I know I will be extremely distressed the first
time I am in a driverless car. I have never even used cruise control, because I
must always be in total control of my vehicle. However, I do look forward to
the day when I summon a car to take me to my doctor’s office. A robot will load
me in the vehicle and another robot will lift me out. If I can adapt to this, I
think other’s in my generation will also.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">But the final push for self-driving cars may come from
insurance companies. If you drive your car, your rates are $10,000 a year, but
they fall to $1,000 if the car drives itself. “This is America, so it is your
choice. We are not telling you what to do, but…”</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Why is public opinion so important? Because Congress is not
going to approve the use of driverless trucks if people are fearful. It may
take years to even write the regulations. Of course if one political party writes
them, they will be too lax, and if it is the other party, they will be too tight.
But there will be extensive debates and lobbyists promoting various interests,
etc.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">You can argue that the financial incentive for driverless
trucks is so significant it will overrun all the obstructions and objections:
“It is so obvious that they have to pass it!” Yes, and the government is
working so well, it is currently shut down. And I will refer you back to the
history of legislation on freight weight and trailer size. “When is that
33-foot trailer legislation going to pass?”</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Now, you can also argue that the truck will always need a
“driver,” but that is based on today’s technology and logistics framework.
Twenty years from now technological improvements in automation, robotics, and logistics
adaptation may change everything. Maybe then you will just need an “attendant”
to ride in the vehicle for emergencies. This could even spark a new form of
ride sharing. “Ride in the truck for free from Kansas City to Memphis and call
us if anything goes wrong.”</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">I do agree with those who say “platooning” will come first.
This involves two or more trucks connected by automated driving technology traveling
down the highway in a line, separated by a close, set distance from each other.
Successful platooning will also help people to accept the self-driving truck
concept. However, this still will need to be legislated, with regulations, etc.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">And that’s why it is difficult to put a timetable on it. If
you forced me to place a bet, maybe 2027. But driverless trucks will remain a
hot topic of discussion until it ultimately happens. As I said, it is the topic
I am asked about the most. I was actually giving my opinion on the subject to
an anesthesiologist as he waited for me to go under before a recent medical
procedure. So, it has to be an important subject because if something went disastrously
wrong, those would have been my final words! </span><br />
<br />
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"> </span><span style="font-family: "arial" , sans-serif; font-size: 12.0pt;"><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><i>This
post first appeared on the FTR website with minor changes here.. FTR
is the leader in analyzing and forecasting the commercial transportation
industry. For more information on FTR reports and services, please </i></span><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i>.)</i></span></span></div>
Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-39214911889117288352018-11-15T12:54:00.000-08:002018-11-15T12:57:58.932-08:00Why The Last Mile Is Such A Big Deal<br />
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><b>Why the last mile is such a big deal…<o:p></o:p></b></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><i>(The last mile refers to the final distance covered to get
an on-line purchase delivered to your door. The journey from factory to your
house may take over 7,000 miles, but the last leg of that journey is gaining importance
in the transportation sector)</i><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Think about a common, small-ticket item which you hate to
purchase. A good example for me are windshield wipers, and, on a recent rainy
drive to Pennsylvania, I realized it was time to change my blades.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The usual buying process for the product is as follows:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Drive
to the auto parts store, which for me is “not on the way” to anything, about a
10-minute trip one-way.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Find
the wiper blade catalog which is dirty, roughed-up, and missing some pages. The
large book is difficult to hold because it is chained to the shelf and there is
no place to set it down.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Find
your car in this book. The book is not easy to read because the type is small,
the pages are thin and the store lighting dim.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Find
the cryptic code for the wiper blade you need. Something like: FGR3T-47 and if
you need two sizes: FGR4T-47.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Search
the stock of wiper blades trying to remember the secret code that you need
because you can’t write it down.<span style="mso-spacerun: yes;"> </span>The
blades are not displayed in any particular order, so it’s difficult to find the
right one.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">6.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">After
searching for a couple minutes, you determine that the blades you need are not
stocked in that brand.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">7.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Repeat
Steps 2 through 5. Usually you can find your wipers in the second brand
searched, but if not, you need to repeat those steps for brand three.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">8.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">You
finally find them and head to the check out. On at least one time in your life,
you grab the wrong ones, foolishly confusing FGR3B-47 for the blades you
wanted.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">9.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Wait
at the checkout counter as the cashier is on the phone having an in-depth
discussion about the transmission on a ’68 Mustang.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">10.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Pay
for your purchase and receive four grease-coated coins as change.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-list: Ignore;">11.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Drive
home. Estimated time of total trip = 35 minutes.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Who needs that? <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><b>A Better Way?</b><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><b><br /></b></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">I was running behind on things after returning from my trip
and having difficulty finding time to go to the auto parts store. So, one day
at lunchtime I Googled “windshield wipers.” The first website up was
Walmart.com. Clicked, entered the make, model, and year, and was instantly
presented with four brands of wipers at various price points. Selected the second-best
brand and went to checkout. But I was $4.59 short of free shipping. What to do?
No problem, the website showed me four related products, that would raise my
total over the <table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-4niT_oa896A/W-3cwQgUB3I/AAAAAAAAKFE/7vj099MbFZk14YR97Kemm3jVtLAYVzRWQCLcBGAs/s1600/glass.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1600" data-original-width="1200" height="200" src="https://2.bp.blogspot.com/-4niT_oa896A/W-3cwQgUB3I/AAAAAAAAKFE/7vj099MbFZk14YR97Kemm3jVtLAYVzRWQCLcBGAs/s200/glass.jpg" width="150" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Free Goods, Even!</td></tr>
</tbody></table>
threshold. I selected the Glass Water Repellent for $4.69, entered
my payment information, and bada bing, bada boom, the purchase was completed in
about five minutes.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">I didn’t even look at the delivery information since I
didn’t need the blades right away. So, I was startled to see the delivery guy
scurrying across my yard (I work from home) with the Wal-Mart box the very next
day. Alas, they had not delivered in 24 hours, it was actually 25.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Now today we consider this commonplace, we even expect it,
but let’s ponder just what happened here.<span style="mso-spacerun: yes;">
</span>What would be the reaction, if just several years ago I called the auto
parts store and said this? <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Here’s
my car information. Now go get me prices on every brand you carry. <span style="mso-spacerun: yes;"> </span>Then I’m going to choose one and have you
process my payment over the phone. Then I want you to go pull my blades off the
shelf and package them up for me. Yeaaah, I’m going to need you to deliver them
to my house tomorrow. Oh, and I’m not paying any delivery charge. If you could
do that, that would be greaaaat. <o:p></o:p></span></i></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></i></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Now spread this hassle-free buying experience over millions
of products and you can hear the collapse of the brick-and-mortar, as the last
mile explodes. And, of course, this trend is accelerating. Millennials demand
ease of purchase in everything, and baby boomers (like myself) are learning we
don’t have to put up with the annoyances of yesterday, because there is really
a better way. Everyone will eventually want it fast, easy, and free.<span style="mso-spacerun: yes;"> </span>And the “last mile” will cease to be a common
term, it will just be normal, standard practice.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The transportation/logistics network has been adapting to
these consumer/cultural changes. The system is better than it was, but not
optimal. Eventually, one can imagine a network of automated warehouses,
serviced by a fleet of self-driving delivery vehicles. And drones, don’t forget
drones. Lots of drones.<o:p></o:p></span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><i>This post first appeared on the FTR website. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i>.)</i></span></span></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com1tag:blogger.com,1999:blog-3082934253265791360.post-15542034212524798552018-10-26T08:33:00.000-07:002018-10-26T08:34:54.305-07:00They Said 4% GDP Was Unreachable? What Now?<br />
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; line-height: 107%;"><span style="font-size: 14pt;">The conventional economic wisdom (as defined by the
forecasts of the most respected economists) last year, was that GDP would not
be able to hit 4% for any quarter in 2018. When the economy achieved 4.1% in Q2 2018,
the </span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-biZ2z0yMcY4/W9Mzb42nCfI/AAAAAAAAJ4Y/mGcwHXJszjM5Gnik5o-z0JqDGcSRxgxlACLcBGAs/s1600/owl-.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="839" data-original-width="679" height="200" src="https://1.bp.blogspot.com/-biZ2z0yMcY4/W9Mzb42nCfI/AAAAAAAAJ4Y/mGcwHXJszjM5Gnik5o-z0JqDGcSRxgxlACLcBGAs/s200/owl-.jpg" width="161" /></a></div>
<span style="font-size: large;">conventional wisdom was that i<span style="color: black;">t</span> was a blip
and that growth rate could not be sustained. But it looks like Q3 will come in
around 4% again. </span> <span style="font-size: 14pt;">Now the </span><span style="font-family: "arial" , sans-serif; line-height: 107%;"><span style="font-size: large;">conventional
wisdom is that economic growth has peaked in this cycle. The economy will start
to slope downward in Q4 and continue to ease in 2019, eventually returning to
trend growth of somewhat above 2%.</span><span style="font-size: 14pt;"><o:p></o:p></span></span><br />
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The question I have been asking colleagues and analysts
lately is: What happens if these so-called experts are wrong again. What
happens if we get two more quarters of 4% growth? <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Now, there are several things that support the conventional
outlook. The economy is very cyclical and<span style="color: black;">,</span> now
that the economy has been allowed to upcycle, we should expect some type of
downcycle, maybe even a recession. Unemployment is at a 49-year low<span style="color: black;">,</span> and the unemployment rate usually bottoms out as
the economy peaks. So, how low can it go? A<span style="color: black;">lso,</span>
it makes more sense this time because companies are having trouble finding more
workers to produce more stuff. If you can’t sell and produce more stuff, the
economy can’t maintain its current growth rate.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Establishing
A Baseline<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The current GDP forecast from the Wall Street Journal
Economists Survey and the forecast from FTR (Freight Transportation Research)
are shown </span><span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">below.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2018Q4<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2019Q1<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2019Q2<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2019Q3<o:p></o:p></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">WSJ
Survey<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2.9%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2.5%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2.5%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">2.3%<o:p></o:p></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">WSJ –
Lowest Forecast <o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">1.7%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">1.0%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">0.9%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">0.0%<o:p></o:p></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">WSJ –
Highest Forecast<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">4.9%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">4.4%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">4.0%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">3.9%<o:p></o:p></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">FTR<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">3.9%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">3.6%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">3.5%<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.5pt;" valign="top" width="125"><div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">3.3%<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The WSJ survey reflects the “conventional wisdom” view
described previously, with the economy back to trend growth, possibly early in
2019. There is a wide gap in the low vs. high forecast numbers in the survey,
indicating the next year contains a high degree of uncertainty. However, these
outlier forecasts do not seem feasible. It would be difficult for the economy
to accelerate going into 2019<span style="color: black;">;</span> likewise<span style="color: black;">,</span> it would be a surprise it the economy cooled that
rapidly<span style="color: black;">,</span> unless there were a shock to the
system (however, as I am typing this, the stock market is plunging again). The
FTR forecast is more optimistic, showing a gradual easing back from the peak,
and still growing at a healthy 3.3% rate into the second half of 2019.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">A Look
At The Forward Looking Indicators<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Now that we have a baseline to work from, let’s see what
some forward-looking economic indicators are saying.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Leading
Indicators<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The Conference Board Leading Economic Index has cooled from
the hot numbers of last October through February, but they are still vibrant.
However, the Weekly Growth Index from ECRI has cooled considerably from Q1,
even briefly touching negative in August.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Manufacturing<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The ISM index for New Orders and Backlogs indicate
manufacturing growth should slow slightly in the coming months.<span style="mso-spacerun: yes;"> </span>However, the numbers remain historically
strong.<span style="mso-spacerun: yes;"> </span>Growth in Factory Orders flattened
during the summer.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Housing<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Recent numbers on Building Permits show a small y/y
gain.<span style="mso-spacerun: yes;"> </span>The Housing Market Index (HMI) has
edged down from the high readings in Q1. The future of the housing market
appears to be more of the same, providing neither a boost <span style="color: black;">n</span>or <span style="color: black;">a </span>drag to the
economy.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Consumer
Spending<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">My Discretionary Spending Index (based on key elements of
retail sales) shows consumers have plenty of discretionary income, and they are
spending it. Wages are finally beginning to increase, and this<span style="color: black;">,</span> combined with low unemployment, bodes well for the
consumer segment of the economy.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Confidence/General
Indices <o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The NFIB Small Business Optimism Index continues to run
hot. Tax reform is really boosting this segment<span style="color: black;">,</span>
and the high numbers should lead to more new jobs. The General Activity Index
from the Philly Fed is still strong, but lower than it was through the first
half of the year. The same is true for the Moody Survey of Business Confidence.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">What
About the Awful Tariffs?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">I have not seen an accurate forecast yet regarding the
impact of new U.S. tariffs and retaliatory foreign tariffs. All initial
forecasts tend to say the impact will be disastrous and then gradually wither
to a forecast of moderate to negligible effect. However, some tariffs are only
starting to kick in, so it’s too early to judge. </span><span style="font-family: "arial" , sans-serif; font-size: 14pt;">The doomsday forecasts
typically assume that if a tariff produces negative consequences, it will be
allowed to continue indefinitely. If you view the U.S. tariffs as punitive,
this would be the case. If you think the tariffs are strategic in nature, then
they will be fluid, and change as circumstances dictate. The tariffs do
increase short-term risk for the chance of long-term rewards.</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The
Trucking Markets<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Trucking fleets are ordering Class 8 and commercial
trailers in huge, unprecedented numbers. So they expect this economic boom to
continue through next year.<span style="mso-spacerun: yes;"> </span>However,
fleets tend to be reactionary and are placing these orders based on the current
conditions they are experiencing. As we have seen, the indicators do not
predict this trend will continue. The FTR freight forecast is for moderating
truckloads <span style="color: black;">in </span>the second half of 20<span style="color: black;">1</span>9. Therefore, all the trucks being ordered today
will probably not be needed. Expect order cancellations to be pervasive
throughout next year. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Conclusions<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The data backs up the conventional wisdom that the economy
will not maintain its hot pace for much longer. Almost all the indicators point
to lower GDP growth in the coming quarters. However, most of the numbers remain
relatively strong, which signals only a moderate change. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The
Call<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">There is no basis to support a GDP exceeding 4% in the next
nine months<span style="color: black;">;</span> however<span style="color: black;">,</span>
it doesn’t appear we are headed down to 2% either. There could be a dip to near
2% in 2019Q1, just because recent Q1 readings have been inexplicably low.
Therefore, I like our FTR forecast of 3.3-3.9% GDP over the time period. <o:p></o:p></span><br />
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><i>This post first appeared on the FTR website. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i>.)</i></span></span></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-45116812781036966502018-09-24T13:25:00.000-07:002018-09-27T06:33:43.294-07:00A Short(age) Tale<br />
<div class="MsoNoSpacing">
</div>
<div class="MsoNoSpacing">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">Trevor Needs Some Water<o:p></o:p></span></b></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">Once
there was a man named Trevor living in a rural area
who bought his drinking water for his water cooler from a local supplier. His
requirements averaged four jugs (5/gal each) a month. In the summer he would
use a little more, and in the winter a little less, but for the year it always
averaged out to four jugs a month. So, every month Trevor would place an order
for four jugs (20 gallons), to be delivered the following month. <o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">But
then an environmental event occurred at the spring where the water company is
sourcing its supply. The company delivers two jugs to Trevor the next month,
instead of four. The company explains the situation. It says he will get his
other two jugs in about three weeks, because they have all their customers on
allocation due to the shortage. They are unsure how much water they will
deliver next month and don’t know how soon the situation will be rectified.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">Now
it is time for Trevor to place his next order. Let’s assume he can place
monthly orders, twelve months out (so 12 monthly orders), and he can change the
quantity he previously ordered, one month before delivery without any penalty.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">How
many jugs would you order under these circumstances? Let’s say Trevor orders eight
jugs a month for the next 12 months. His logic being that if he is on a 50%
allocation, he can still get his four jugs every month. When he is sure supply
is normalized, he will cut the remaining orders in half. He also plans to put four
additional jugs in safety-stock inventory, just in case supply is disrupted
again.<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-EA6_0DgkRf4/W6lH6fBL64I/AAAAAAAAJRo/YJTIMJCRPngmcqxee82uLbZTSFTOGWDeACLcBGAs/s1600/bottle.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1600" data-original-width="1200" height="200" src="https://1.bp.blogspot.com/-EA6_0DgkRf4/W6lH6fBL64I/AAAAAAAAJRo/YJTIMJCRPngmcqxee82uLbZTSFTOGWDeACLcBGAs/s200/bottle.jpg" width="150" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">How many do you order?</td></tr>
</tbody></table>
<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">In
addition, there is another water supplier. Unfortunately, this company draws
water from the same spring and also has a shortage. However, Trevor thinks
there is a chance this supplier could get more water sooner than his main
supplier, so he orders 16 jugs spread out over the next four months from this
company.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">The
typical monthly order is four jugs, but due to a supply shortage, Trevor has
just ordered 112 jugs of water. And let’s say all his neighbors respond the
same way. The water suppliers are ---- flooded with orders! They have never had
so many orders in the history of the business. They don’t have to worry about
filling all these orders in the short-term, because they don’t have enough product
to do so.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">What
is Trevor’s new water demand? It hasn’t changed, it is still four jugs a month.
But the shortage has tremendously impacted his buying (ordering) behavior. Now
traditional economists would find fault with my story, claiming that if demand
is 4 jugs, the rational action would be to order 4 jugs. However, I think
behavioral economists would agree with my conclusions. Heck, if Trevor were
thirsty when he was placing his order, he may have even ordered more.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">Now
under classic economics, the price of water would rise to alleviate the
shortage. We are going to assume the water companies are going to use
allocation in the short-term instead of price, so as to not alienate their long-term
customers when the shortage ends.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">The Reality of the
Class 8 Truck Market<o:p></o:p></span></b></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">Now,
you cannot argue that the story is not realistic, because it is based on what
has happened in the Class 8 truck market this year. Orders for the last two
months have been at all-time record levels. In fact, six of the top order
months ever have occurred in the first eight months of 2018. Over 477,000 truck
orders have been placed in the last 12 months, shattering the previous best
12-month period of 400,000 in 2005-2006. Those orders resulted in the peak
production year of 376,000 trucks in 2006. The industry will be stretched to build
that many in 2019 due to factory closings since 2006.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">The
primary reason for the high orders is a vibrant economy generating outstanding
freight growth. Earlier this year, however, component suppliers could not keep
up with this surge in truck demand. This shortage of components led to a severe
shortage of Class 8 trucks. At one point, OEMs had around 1,000 semi-completed
trucks parked, awaiting final components before they could ship. Some truck
dealers waited over two months before receiving much needed inventory. OEMs
could not raise prices to alleviate the shortage due to contracts and not
wanting to damage long-term customer relationships.<o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">The
truck shortage has been abated for now, and suppliers are doing a much better
job of meeting delivery dates. However, the supply chain is still very tight
and could easily reemerge as an issue in the near future. Therefore, since
demand remains robust, the response from fleets and dealers is to order trucks
in record numbers, for delivery up to 12 months out, hoping to reserve more
trucks if they are needed. <o:p></o:p></span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">What
is true demand? Unfortunately, its difficult to tell by looking at orders alone
since some of the orders are to hold build slots, months out in the future. And
backlogs are inflated, but by how much? Regardless, demand is extremely strong,
and the fundamentals for freight and equipment demand are solid into mid-2019. <o:p></o:p></span></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;"><o:p> </o:p></span><span style="font-family: "arial" , sans-serif; font-size: 12pt;"> </span></div>
<div class="MsoNoSpacing">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">What Happens Next?<o:p></o:p></span></b></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;">OEMs
have to ramp up production to build all the orders they can, and suppliers have
to keep pace. FTR (Freight Transportation Research) forecasts that freight growth will begin easing in the second
half of 2019. If fleets have adequately increased capacity by that time, excess
orders will begin to be cancelled and squeezed out of the backlog. If the
economy stays at its current pace into mid-2019, the shortages could reappear,
and the order deluge will continue.<o:p></o:p></span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt;"><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><i>This post first appeared on the FTR website with minor changes here.. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span><span style="background-color: #e0e0e0; color: #333333; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i>.)</i></span></span></div>
<div class="MsoNoSpacing">
<br /></div>
<br />
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-56420241079471885432018-07-24T13:38:00.000-07:002018-07-24T13:38:25.492-07:00Bottleneck In The Supply Chain Is An Economic Threat<br />
<span style="color: #333333; font-family: "georgia" , serif;">The Institute for
Supply Management’s PMI for Manufacturing (Purchasing Managers Index) jumped to
60.2 in June, up from 58.7 in May and rising for the second straight
month. Considering that anything over 50 represents growth, the 60.2 is a
robust reading which means everything must be wonderful in the manufacturing
sector, right? Well not so fast, Machine Boy. Literally, not so fast.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">A closer look at the
numbers shows some disturbing trends. A big jump in the Supplier Deliveries
sub-index indicates deliveries from manufacturers to customers slowed
tremendously in June.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">The primary reason
for late deliveries is a lack of manpower. Manufacturers assumed they would be
able to expand capacity when they took the original orders, but because the
economic recovery is widespread, all industries have been competing for the
same labor pool. That left many companies short on workers.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">Even if you have
enough workers, there still can be problems (as will be discussed later) if
your suppliers are short on staff. If your supply chain consists of 50 vendors,
but 10 of these suppliers are delivering late, it’s going to wreak havoc with
your production schedule and result in late deliveries.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">Another reason
deliveries are slow is lack of trucking capacity. Fleets managed capacity
very conservatively after the Great Recession and that worked well in a slow
growth economic recovery. But now that commerce has accelerated, there are not
enough trucks and trailers to handle the amount of growing freight. Many
companies have been forced to bid for trucks in the spot market for the first
time in years. This is resulting in many late deliveries.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<strong><span style="color: #333333; font-family: "georgia" , serif;">Class 8
Equipment Issues</span></strong><span style="color: #333333; font-family: "georgia" , serif;"><o:p></o:p></span><br />
<strong><span style="color: #333333; font-family: "georgia" , serif;"><br /></span></strong>
<span style="color: #333333; font-family: "georgia" , serif;">The conditions
causing delivery delays detailed above are severely prominent in the Class 8
equipment market. Specific numbers are difficult to obtain, but industry
sources tell me that more than 30 parts are in short supply at truck OEMs. Most
of the shortages are the result of Tier 1, Tier 2 and even Tier 3 suppliers not
being able to hire enough workers to make the needed components and parts.
Companies are in some cases air-freighting parts in from Asia to keep
production lines running.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">Word on the street
is there are over 10,000, and maybe as many as 15,000, semi-completed Class 8
trucks parked, waiting for parts to arrive, so they can be driven off the lots.
Component deliveries have been so slow that some of these trucks have sat for
over a month.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">There is no good way
to predict when the supply chain will open up and all needed parts and
components will be delivered on time. And even when the key components arrive,
all these trucks will need to be delivered to dealers and fleets throughout the
country. This presents a logistics nightmare since OEMs were having problems
finding drivers to deliver the trucks before the supply chain bottleneck
struck. </span><br />
<div class="separator" style="clear: both; text-align: center;">
<span style="color: #333333; font-family: "georgia" , serif;"><a href="https://2.bp.blogspot.com/-gAXPD74t7P8/W1eOEDhaH9I/AAAAAAAAIY4/9GD6AfNU7SwkrB9Qa09iAvw1oTv82on3wCLcBGAs/s1600/truck%2Bbackup.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="787" data-original-width="1400" height="179" src="https://2.bp.blogspot.com/-gAXPD74t7P8/W1eOEDhaH9I/AAAAAAAAIY4/9GD6AfNU7SwkrB9Qa09iAvw1oTv82on3wCLcBGAs/s320/truck%2Bbackup.jpg" width="320" /></a></span></div>
<span style="color: #333333; font-family: "georgia" , serif;"><o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<span style="color: #333333; font-family: "georgia" , serif;">So ironically, the
driver shortage is causing delivery problems in the trucking industry.
The driver shortage has grown progressively worse since the beginning of 2016
and is reaching a critical point. With the unemployment rate at 3.8% and the
competition for workers from other industries, it gets more difficult for
fleets to hire drivers every day. A recent article in the Washington Post
told the story of an 87-year old man who was offered a trucking driving job,
provided he obtained his CDL. However, he turned down the $50,000 a year job
because he did not want to spend that much time away from home.<o:p></o:p></span><br />
<br />
<strong><span style="color: #333333; font-family: "georgia" , serif;">Tariffs
Enter the Picture</span></strong><span style="color: #333333; font-family: "georgia" , serif;"><o:p></o:p></span><br />
<strong><span style="color: #333333; font-family: "georgia" , serif;"><br /></span></strong>
<span style="color: #333333; font-family: "georgia" , serif;">Most discussions of
the new tariffs involve the impact on prices. However, my sources tell me they
will soon negatively affect the supply chain in the short-term. Aluminum
coils from China and steel stock from other countries have been diverted or
delayed because of the tariffs. Soon U.S. manufacturers will need these
materials to make parts, components and products – some for the truck
OEMs. To a supply chain already performing poorly, the tariffs hitting at
this moment just adds to the mess.<o:p></o:p></span><br />
<span style="color: #333333; font-family: "georgia" , serif;"><br /></span>
<strong><span style="color: #333333; font-family: "georgia" , serif;">The Economic
Impact</span></strong><span style="color: #333333; font-family: "georgia" , serif;"><o:p></o:p></span><br />
<strong><span style="color: #333333; font-family: "georgia" , serif;"><br /></span></strong>
<span style="color: #333333; font-family: "georgia" , serif;">The lack of parts
and components, for all industries, slows down production. The lack of trucking
capacity slows down the movement of goods. At some point, this will slow down
economic growth. Normally, you would expect the economic laws of supply
and demand to balance things out. And this will happen, in the long run. In the
short run, it’s about to get ugly.<o:p></o:p></span><br />
<div class="MsoNormal">
<br /></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-46525739410288840532018-06-13T12:53:00.000-07:002018-06-16T10:15:12.695-07:00A Very Simple Freight Analysis <br />
<span style="color: black; font-family: "arial" , sans-serif;"><span style="font-size: 14pt;">Trucking
conditions are in wonderful shape. Fleets can’t keep up with demand and freight
rates are high. Sales of trucks and trailers are expected to </span></span><br />
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-exQxk3DcLhY/WyF12x4WCEI/AAAAAAAAIIc/yeEpVFFHc-YSO5txmc6EvRXa4NOpYbGugCLcBGAs/s1600/trucks%2B2.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="737" data-original-width="1600" height="91" src="https://1.bp.blogspot.com/-exQxk3DcLhY/WyF12x4WCEI/AAAAAAAAIIc/yeEpVFFHc-YSO5txmc6EvRXa4NOpYbGugCLcBGAs/s200/trucks%2B2.jpg" width="200" /></a></div>
<span style="font-size: large;">approach record
levels this year. The need for new truck drivers is huge and fleets and many
owner-operators are making lots of money</span><span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">.</span><br />
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span>
<br />
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">What’s
going on? <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Total
Manufacturing (from the Industrial Production data) is strong. Meaning: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Food
shipments are robust. People have more disposable income and are spending lots
of it at restaurants. Result: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Building
materials are also healthy, but expected to moderate some in the second half of
the year. There is a demand for new houses and office buildings. Causing: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Chemical
products started of the year slow, but are expected to recover in Q2 and
beyond. Manufacturing should boost this sector. Leading to: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">*
Fabricated Metals are smoking hot. Manufacturing needs these components in high
volumes. Making: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Wood
products are also up due to the construction sector. Subsequently: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Durable
Goods manufacturing is way up. Non-Durables are growing. Result: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* The Oil
and Gas sector is exploding as crude oil prices rise. Causing: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* FTR’s
Trucking Condition Index is at extremely high levels and is only expected to
moderate slightly this year. Why? <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* FTR’s
Trucking Market Demand Index was at a record in April. Indicating: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">*
Unemployment just sank to 3.8%. People have jobs. People have money. People are
buying lots of products that are moved by trucks. Result: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* Some
economists have forecasted GDP growth of 4% for Q2. Which leads to: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* FTR’s Active
Truck Utilization measurement is near 100% and expected to stay that way
throughout 2018. This means nearly all active Class 8 trucks are being
employed, because, of course – <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* An
industry veteran recently said he has never seen a market this strong in his 28
years of trucking. This is because: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* When
traveling down the highway, you see many tractor-trailers hauling many types of
goods. All because: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">* There is
a severe shortage of truck drivers to haul all the goods. Due to: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">Demand for
new Class 8 trucks and commercial trailers are at record levels. So much so,
that component suppliers cannot keep up with orders. All because: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">A German
economist analyzing this situation might say: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">Die Fracht
ist großartig! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">Which
translated means: The Freight Is Great! <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">So, to
summarize the current state of the trucking industry in four words: <o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;"><br /></span></div>
<div style="-webkit-text-stroke-width: 0px; orphans: 2; word-spacing: 0px;">
<span style="color: black; font-family: "arial" , sans-serif; font-size: 14.0pt;">The Freight
Is Great! <o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<span style="background-color: #e0e0e0; color: #333333; font-family: arial, sans-serif; font-size: 14pt; line-height: 19.97px;"><i>This post first appeared on the FTR website with minor changes here.. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span><span style="background-color: #e0e0e0; color: #333333; font-family: arial, sans-serif; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i>.)</i></span></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-44782410475998964332018-04-16T08:39:00.001-07:002018-04-16T08:39:06.771-07:00Let The Good Times Roll – For at least two more years<br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">GDP is high, and unemployment is low.<span style="mso-spacerun: yes;"> </span>Manufacturing is booming, and wages are
rising. So, everyone is joyous, correct?<span style="mso-spacerun: yes;">
</span>Of course not, you are starting to see articles claiming that if things
are this good, a recession must be coming soon.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">So it is time to again consider what the truck equipment
markets indicate about the timing of the next recession.<span style="mso-spacerun: yes;"> </span>In March 2016, I warned that based on
historical correlations, the decline in Class 8 truck builds foretold a
recession beginning in Q4 2016.<span style="mso-spacerun: yes;"> </span>This did
not happen due to the following factors:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Class 8 truck market ended up suffering a
correction, but not a crash.<span style="mso-spacerun: yes;"> </span>Typically
when sales start to slide, they keep plunging.<span style="mso-spacerun: yes;">
</span>Fortunately this time, they bottomed out in Q1 2017 and began a steady
recovery which continues today.<span style="mso-spacerun: yes;"> </span>It is
important to note that the FTR (Freight Transportation Research) models in
mid-2016 showed the market correcting but not crashing.<span style="mso-spacerun: yes;"> </span>That’s why our forecasts were much more
accurate than all those other one’s which predicted a market crash.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">GDP for Q4 2016 and Q1 2017 were 1.8% and 1.2%
respectively.<span style="mso-spacerun: yes;"> </span>While not a recession, the
“economic plane” did dip close to the ground before pulling out of the dive. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;"><span style="mso-list: Ignore;">-<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Although the economy had failed to cycle much
since 2010, the Class 8 truck market continued to cycle through the period. The
substantial difference being that truck demand didn’t cycle as much as in the
past (a good thing), which is the difference between having GDP quarters of
1.8% and 1.2% growth versus a recession.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The U.S. economy has been expanding for over eight and a
half years; the third longest period since World War II.<span style="mso-spacerun: yes;"> </span>But this recovery has been characterized by
its slow, plodding growth and muted cycles.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Good News: The economy is finally experiencing significant
growth again.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Bad News: The economy is finally experiencing significant
growth again.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">If we cycle way up, eventually the economy overheats and
cycles down causing a recession.<span style="mso-spacerun: yes;"> </span>But it
is even more difficult to predict the timing of the next recession under the
current unusual environment. If the Trump administration’s economic initiatives
work, then giddyap, we are going to ride this wave for a while.<span style="mso-spacerun: yes;"> </span>If this upcycle is the result of the
restoration of normal economic fluctuations or in the trade strategies fail, we
are quickly coming to an economic peak.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">And this may be a return to the “old normal”.<span style="mso-spacerun: yes;"> </span>I believe that the slow, abnormal economic
growth of the past several years was the result of restrictive government
policies and businesses being too cautious and fearful after the Great
Recession.<span style="mso-spacerun: yes;"> </span>President Trump has loosened
those restrictions and business and consumer confidence is soaring for whatever
reasons.<span style="mso-spacerun: yes;"> </span>This may be just a huge economic
reset that took eight years to accomplish after the crash.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">What Do
The Equipment Markets Indicate Now? <o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It is important to watch the truck and trailer markets
because they are leading indicators of the general economy.<span style="mso-spacerun: yes;"> </span>Class 8 truck sales is one of the key
economic leading indicators tracked by the economists at General Motors.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Good News: The equipment markets and the economy appear
to back in sync. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The Bad News: The equipment markets and the economy appear
to back in sync. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">As previously mentioned, the equipment markets continued to
cycle even though the economy did not change much.<span style="mso-spacerun: yes;"> </span>However, now the economy is vibrant, and it
is pushing equipment sales to record levels (if you factor out the Class 8
pre-buy factor in 2006).<span style="mso-spacerun: yes;"> </span>This is good in
that it shows the economy is healthy and getting back to performing
“normally”.<span style="mso-spacerun: yes;"> </span>It is bad in that the
equipment market, driven higher and hotter, will probably experience a perilous
drop before and during the next economic downcycle. This type of drop is
inherent in truck and trailer equipment and cannot be avoided.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Because of the significant impact of a recession on truck
and trailer demand, FTR cannot put a recession factor in the forecast.<span style="mso-spacerun: yes;"> </span>For example, in we forecast a recession for
2020, it would drive our equipment forecast way down that year.<span style="mso-spacerun: yes;"> </span>But if the recession occurs in 2021, then the
forecast for both those years would be highly inaccurate.<span style="mso-spacerun: yes;"> </span>So the assumption for the forecasts is for no
recession, even as the possibility increases due to the length of this recovery
and the surging economy. <span style="mso-spacerun: yes;"> </span>If the “master”
economists cannot predict the timing of the next recession – than neither can
we.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">When
Is The Next Danger Zone?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Based on history, which doesn’t always repeat and
forecasts, which can be inaccurate in the long-term, when do the equipment
markets indicate a recession could begin?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; line-height: 107%;"><span style="font-size: 14pt;">If truck/trailer production peaks around June 2019 (the
current forecast), and recessions occur 13-18 months after that (based on
history), the “danger zone” would be July-December 2020, which is as good as
anyone’s forecast right now.</span><span style="font-size: 14pt;"> The good
news is unless there is an economic or geopolitical shock, we</span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://1.bp.blogspot.com/-lTX849hxu1Y/WtTCseJAehI/AAAAAAAAHho/lyPQJsnO27MNLPx0LHdbNLqb4sYq220MwCLcBGAs/s1600/Let%2BGood%2BTimes1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="772" data-original-width="1160" height="212" src="https://1.bp.blogspot.com/-lTX849hxu1Y/WtTCseJAehI/AAAAAAAAHho/lyPQJsnO27MNLPx0LHdbNLqb4sYq220MwCLcBGAs/s320/Let%2BGood%2BTimes1.jpg" width="320" /></a></div>
<span style="font-size: large;"> don’t have to
worry about a recession for the next two years.
The bad news is if the economy accelerates the next two years, the eventual
downturn is going to hurt. </span><span style="font-size: 14pt;"><o:p></o:p></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">So, let the good times roll – for now.</span><span style="font-family: Arial, sans-serif; font-size: 14pt;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><o:p> </o:p></span><span style="background-color: #e0e0e0; font-family: "arial" , sans-serif; font-size: 14pt; line-height: 19.97px;"><span style="color: #333333;"><i>This post first appeared on the FTR website. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span></span><span style="background-color: #e0e0e0; font-family: "arial" , sans-serif; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i><span style="color: #333333;">.)</span></i></span></div>
<br />
<br />
<div class="MsoNormal">
</div>
Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-49748719000895666432018-03-26T08:51:00.000-07:002018-03-26T08:51:31.127-07:00How the Trucking Capacity Crisis was Born<br />
<div class="MsoNormal">
<span style="font-size: large;">The U.S. trucking industry is experiencing a capacity
crisis, with insufficient numbers of trucks and trailers to haul an ever-increasing
amount of freight. FTR’s (Freight Transportation Research) measurement of Total
Truck Utilization is currently at 97% (meaning 97% of all trucks are in use). The
index is expected to hit 100% later this year. While it is an impossibility for
100% of trucks to be hauling freight, it indicates extreme capacity </span></div>
<div class="separator" style="clear: both; text-align: center;">
<span style="font-size: large;"><a href="https://3.bp.blogspot.com/-r5dGYZvxDM8/WrkW3O2z6tI/AAAAAAAAHUw/GMWeseMgeSwvDo_BqPHQynEd4-hUy5BcACLcBGAs/s1600/pressure.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="289" data-original-width="400" height="144" src="https://3.bp.blogspot.com/-r5dGYZvxDM8/WrkW3O2z6tI/AAAAAAAAHUw/GMWeseMgeSwvDo_BqPHQynEd4-hUy5BcACLcBGAs/s200/pressure.gif" width="200" /></a></span></div>
<span style="font-size: large;">constraints
in the industry, causing major disruptions for both fleets and shippers. Shippers
are having problems to haul their loads and are paying much higher freight
rates.</span><o:p></o:p><br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: large;">So how did we get into this mess? Well, you can blame the Great
Recession. Throughout the oughts, fleets managed their capacity more loosely, maintaining
a certain amount of “flex capacity” to handle peak freight periods and not
caring much when this excess capacity was idle. This strategy worked well in
that era, when freight continued to shoot upward fueled by the housing bubble. Staying
ahead of a fast-paced game was profitable.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">But then the bubble burst. Most large fleets had enough
capitalization to survive. Middle-sized fleets that managed their assets well
also lived, but over-aggressive ones and smaller fleets got slaughtered. There
were approximately 5,500 fleet bankruptcies in 2008, another 2,200 in 2009, and
still a considerable number in 2010. By 2012, an astounding 18% of trucking
capacity had been removed from the system.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">The long, slow economic recovery that began in 2010 did not
pressure the industry to promptly replace the lost capacity. Fleets were able
to put trucks back into service at a measured pace. The trucking industry, as
well as many sectors of the economy, benefitted from the sluggish recovery
because growth was easier to manage, and profits grew. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Fleets were also very cautious after seeing many competitors
fold during and after the Great Recession. Businesses, overall, were more
cautious, a key proponent of the long, slow recovery. Large fleets managed
their capacity more conservatively. Medium-sized fleets strove to be lean,
efficient operations. The result was a significant reduction in “flex capacity.”
This was very logical under the circumstances, and extra capacity was rarely
needed in the slow-growth environment.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Capacity utilization reached the normal range in mid-2013,
signaling the industry and the economy were regaining strength. Utilization
percentages were fairly stable for a few years, except for a blip due to the
Hours-of-Service regulations in late-2014. However, the utilization rate began
a definite upward climb in mid-2016 and accelerated through 2017.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">During an FTR forecasting meeting in January 2017, our
updated capacity utilization forecast graph appeared on the screen. There was
stunned silence … and then someone said:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">“If this is correct, we’re headed for a severe capacity
crunch early next year.” <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Our model predicted that accelerated freight growth would combine
with productivity-limiting ELD implementation, to push the capacity utilization
percentage to near 100% in 2018. Based on this, we began to warn our customers
about the “possibility” of a capacity crunch. The expected rise in utilization
was a main reason the 2018 FTR equipment forecasts were much higher than other
forecasts for almost all of last year.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">And then the surge in business confidence after the election
started to turn into real dollars. The roll-back of regulations provided more
economic impetus. Manufacturing activity revived, and the freight forecasts
kept increasing. Now throw in some tax reform. The same forecast graph that
caused the commotion 14 months ago appears even more ominous now.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">The flatbed fleets saw the surge beginning last May and
began to ramp up capacity. Spot market rates started to shoot up last March,
flattened out in the second half of 2017, and then spiked at year’s end. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">In September, we began hearing complaints from some large
shippers that couldn’t find trucks to haul their freight. They had contracts
but not trucks. This forced them into the spot market, resulting in higher
freight costs and increased late deliveries. The frustrated logistics managers
had to explain why the company was paying higher prices for reduced customer
service.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">But many fleets remained cautious in responding to the
capacity crisis. Some people questioned our optimistic 2018 equipment forecasts
as late as October, explaining the fleets were not showing any urgency in
placing orders for 2018.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">However, this was to be expected. It took over ten years for
freight volumes to recover after the Great Recession, and fleets had learned to
manage their capacity well over that time. It’s difficult to change what is
working well. For the industry as a whole, it’s like filling a big barrel with
a hose delivering a slow, steady stream. It takes a long time to fill the
barrel, and you get bored waiting for it to top out. Just when you are near the
top (which you can’t really see), the water pressure increases and now you have
an overflow you are not ready for – and a mess.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Now orders for trucks and trailers are pouring in, OEMs are
increasing rates, and we all hope that fleets can find drivers for the new
trucks they hope to put into service. It’s a mad scramble: shippers trying to
find trucks to efficiently move goods, and truckers trying to supply those
trucks. And if it can’t be done, economic growth will suffer.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<br />Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-11310393408843384082018-02-12T05:46:00.000-08:002018-02-12T05:46:16.881-08:00How A Sea Change Happens<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><i>A sea change happens one dr</i>op at a time …<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Problems
at the Mall<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">I make my annual Christmas shopping trip to the mall around
December 10 every year. For at least the last ten years, I have purchased
calendars at a kiosk in the mall. I usually buy at least four calendars: a
365-day desk calendar for me, another desk calendar for my youngest daughter,
and a desk calendar and wall calendar for my oldest daughter.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The calendars for my youngest daughter and I vary in theme
every year depending on what is available and what I bought last year. However,
I always buy my oldest daughter both a Pittsburgh Steeler desk calendar and
wall calendar every year. How I happened to spawn a rabid Steelers fan while
living in Northeast Ohio is another story. I know I am very much a pattern
shopper, but my routine is relevant to the rest of this story.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">About five years ago I was surprised when the calendar kiosk
moved to a much less prominent location in the mall. I reasoned that the mall
had raised rental fees and the company had decided to change locations rather
than pay the higher cost. The new location must have cut into sales too much,
because the next year the calendar kiosk was back at its previous location,
although it was slightly smaller. Then each subsequent year, it was scaled back
some more. This made business sense as fewer people were going to the mall, due
to on-line shopping and competition from superstores. As sales decreased at the
kiosk, costs were lowered by reducing the rental space.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">This reduction in calendar selection did cause some issues
for me. It became more difficult to find calendar themes I wanted. This year,
the kiosk was about half the size it was five years ago. They took the
board/card game kiosk that always stood next to it and combined it with the
calendars into one kiosk, about the size of the original calendar kiosk. I was
immediately concerned about finding desirable desk calendars for my daughter
and myself, but I fortunately found two good ones. However, the number of
sports team calendars had been greatly reduced, and there were no Pittsburgh
Steeler calendars.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The sales clerk said they had sold out of those because it
was a popular calendar this year. Of course, based on my many years of
experience buying calendars at this kiosk, I knew this was not true. They
didn’t have the calendars this year because they had significantly cut
inventory. I paid for my two calendars and drove home thinking about how I
could get the Steelers calendars before Christmas. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Ten minutes after returning home I logged on to
calendars.com. I quickly found my Steeler calendars and, surprisingly, they
were both $5 cheaper than what I usually pay at the kiosk, and shipping was
free. I also noticed the wide variety of desk calendars they offer; my guess is
at least 10 times more calendars than the kiosk. The calendars arrived in eight
days, and everyone had a Merry Christmas.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Now where do you think I’m going to buy all my calendars
next year? Multiply this change in my buying behavior by millions of purchases,
and it explains the already enormous growth in on-line sales and suggests it
will continue. Now this wasn’t my first on-line purchase, that happened in
1999. I remember it because my co-worker Kurt congratulated me on having the
courage to submit my credit card number on-line. Of course, there are still
issues. I ordered something this summer from a Facebook ad and the bogus
company failed to send the merchandise, and also hacked my credit card number. Overall,
for many items, on-line purchasing is superior to in-store shopping.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The
World Gets Smaller and the Supply Chain Shorter<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">My most interesting gift this Christmas was a pair of
sneakers I customer-ordered from China. The shoes were ordered from another
Facebook ad (I guess I’m a gambler). What makes the shoes special is that they feature
the name and logo of my alma mater, The University of Akron. Instead of
stocking inventory of assorted sizes of the hundred or so universities
(assuming) available, they only need to stock the shoe “shell” and then print
the graphics on fabric and glue it to the shell. So, through the magic of the
Internet, I can custom order Chinese-made goods. I would be very interested to
see the actual factory where my shoes were made.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; line-height: 107%;"><span style="font-size: 14pt;">I ordered the shoes just after Thanksgiving, and they
arrived one week later </span></span></div>
<div class="separator" style="clear: both; font-size: 14pt; text-align: center;">
<a href="https://2.bp.blogspot.com/-TlWiPAkWuZE/WoGaNLUCQiI/AAAAAAAAG1Q/S7kb7vlejoUziZ6NfbupGaSeo7u46EoQQCLcBGAs/s1600/shoes_1775.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1199" data-original-width="1600" height="239" src="https://2.bp.blogspot.com/-TlWiPAkWuZE/WoGaNLUCQiI/AAAAAAAAG1Q/S7kb7vlejoUziZ6NfbupGaSeo7u46EoQQCLcBGAs/s320/shoes_1775.jpg" width="320" /></a></div>
<span style="font-size: large;">than promised (they got delayed in customs according to
the package tracking they provided) but got here four days before Christmas. My
wife loved the gift! (not easy to please), and I got a pair for myself. However,
I don’t think the logos and images are licensed, so technically I am wearing
illegal shoes to the Akron U basketball games. I have not been arrested yet.</span><span style="font-size: 14pt;"><o:p></o:p></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The
Sea Change For Transportation<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Huge selections and free shipping. Ordering customer-made
goods from Chinese factories. These are the drops that are fueling this sea
change. And just when you thought this movement was containable, 3-D printing
is only beginning. More ships are about to be capsized, with the changes to
transportation and logistics again inevitable. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<br /></div>
Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-67185974154250640012018-01-16T12:56:00.000-08:002018-01-16T12:56:14.974-08:00Christmas Lights Shine for a Bright Economy<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">An unusual economic indicator that I track is “Outdoor
Christmas Lights” (OCLs). OCLs are a
coincidental economic indicator, providing
information about the current state of the economy. This indicator is only
relevant when the economy is getting weaker or growing stronger, and its
measurement is highly subjective – more observational than measurable. Also, it is only able to be observed for a few weeks
each year. </span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-1tm4Hqp-BYA/Wl5mxXY4wWI/AAAAAAAAGqw/G8GzpfsHQzIz3qMuLlegtuIjaIGBcv2vACLcBGAs/s1600/Christmas-Lights-Spirit-3872.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1500" data-original-width="1500" height="200" src="https://3.bp.blogspot.com/-1tm4Hqp-BYA/Wl5mxXY4wWI/AAAAAAAAGqw/G8GzpfsHQzIz3qMuLlegtuIjaIGBcv2vACLcBGAs/s200/Christmas-Lights-Spirit-3872.jpg" width="200" /></a></div>
<o:p></o:p><br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">I believe OCL purchase/usage is a unique economic behavior
because it combines a variety of factors:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;">-<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It is a purely discretionary purchase at a time
of the year when discretionary money is limited due to gift buying.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;">-<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It involves an expense of time to purchase the
lights/decorations.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;">-<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It involves an additional time investment to
install the lights. However, this investment may not be as extensive due the
increased use of the new projection lights.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;">-<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">It also requires an additional cost of
electricity to power the lights. Another discretionary expense.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;">-<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">People tend to display OCLs for self-enjoyment
and can be a reflection of their overall mood. A large number of people display
OCLs as part of their annual Christmas festivities, while a significant number
may be influenced by how festive they are
feeling in a given year.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 14.0pt; line-height: 107%; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri; mso-hansi-font-family: Calibri;">-<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The use also creates positive economic
externalities in that other people get to enjoy the OCLs. The huge displays
some people employ are done mainly for the external benefits they produce.
There is also a group dynamic in play within neighborhoods where everyone
receives benefits from everyone else’s displays.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Therefore, this is economic behavior that requires an
initial purchase, a physical investment, an ongoing economic investment done
for personal/family mood enhancement, with an external benefit to both
neighbors and strangers. This is a unique situation which has broader economic
indications.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">My
Observation<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">I have lived in the same neighborhood for over 20 years and
have observed (not measured) OCL usage over this time period. I admit it is
only one extended neighborhood (five allotments),
but it is in Stark County, Ohio, a much-watched “bell-weather” county in
presidential elections.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">During 2003-2007, OCL usage steadily
increased. In 2007, the economy was booming and OCL usage peaked. After
the recession hit, OCL displays plummeted for a few years. Then, like the
economy, they increased
gradually from 2012 to 2016. The displays in 2016 were
much more prominent than 2012, but still not up to 2007 levels.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">Which brings us to 2017. What I just observed was an
unprecedented level of OCL usage. All
occupied houses on my street had displays, and
this is on a scarcely-traveled cul-de-sac. There
was a high percentage of participation in the other four neighborhoods as well.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
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<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">What
It Means<o:p></o:p></span></b></div>
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<b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 14.0pt; line-height: 107%;">The economy may be even stronger than what some of the
other indicators say. This also confirms the higher consumer
confidence/sentiment numbers released recently. Look for final Christmas retail
sales numbers to exceed the forecasts. People are feeling good about their
situation and the economy. There is economic momentum continuing into 2018.<o:p></o:p></span></div>
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<br /></div>
Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-41686497020095303332017-12-29T08:05:00.002-08:002017-12-29T08:05:59.637-08:00How the "Trump Bump" Impacted Trucking<div class="MsoNormal" style="line-height: 18.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<i><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Note: This content
first appeared in Global Trailer Magazine and was written for a foreign
audience. However, it does give a broad overview of the factors that have
influenced commercial vehicle sales this year.</span></i><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<i><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></i></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The unexpected election of Donald
Trump has caused a great deal of political turmoil in the United States.
However, the area of Trump’s biggest success has been the business sector,
where a rejuvenated economy has boosted freight growth and commercial vehicle
sales.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Although there have been few new laws
passed, President Trump has been able to influence the economy in other ways.
His impact, which is partially symbolic on the economy, trucking, and equipment
purchases has been significant.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";">The Economy<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">A Shot of Confidence<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Following the election, consumer and
business confidence indexes spiked. Many of these measurements hit levels not
achieved in many years, a couple reached all-time highs. Executives and
citizens clearly expected a “businessman president” to be able to improve the
economy.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">However, business confidence surveys
have been traditionally poor economic indicators because they measure attitude,
not action (actually spending money). For this reason, many economists
dismissed the indexes as a short-term emotional response. However, one of the
factors stifling the U.S. economic recovery was fear. Many businesses barely
survived the Great Recession and watched competitors go bankrupt. This caused
companies to be extremely cautious about investing even years after the
recession ended. Therefore, this increase is confidence factor did matter, but
it took over half a year to have an impact. Although down from peak levels,
most of the confidence indexes remain at elevated levels.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Regulations<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The previous administration enacted
and proposed numerous regulations upon business entities and industries,
including trucking. It was perceived as an anti-business environment. Trump
campaigned strongly against “over-regulation” and, in the first six months as
president, cut or delayed over 800 regulations.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
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<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Gridlock<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The U.S. Government is in a highly
dysfunctional state. Although the Republicans hold the Senate, the House of
Representatives, and the Presidency, they have not been able to pass any
important legislation. This “government gridlock” has traditionally created a
favorable business environment. U.S. companies desire the stable environment
conditions when the government is idle. This leads to increased business
investment, which creates jobs and economic growth.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Manufacturing<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">U.S. manufacturing growth also
accelerated around mid-year. This was not primarily because of Trump, but of
this business cycle. Manufacturing activity slumped late in 2016, impacting the
freight and commercial equipment markets. It started to cycle back up early in
2017, but was boosted by the spike of confidence and regulatory rollback
discussed previously.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Consumers<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The consumer sector also has been
growing all year. The unemployment rate is currently 4.1% (full employment is
considered 4.0% due to transition factors). Although there are factors skewing
this measurement, there are many more people working than several years ago.
Wages have not risen as fast as expected and healthcare continues to eat up a
chunk of disposable income, but consumers are spending at a healthy rate.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">The Results<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The U.S. economy grew at a 3.1% clip
in Q2 and is expected to come in at around 3.0% for Q3. This is higher than
most economists expected. It appears the spike in confidence after the election
had an impact, but it took months before consumers and businesses actually
opened their pocketbooks and began spending money. Of course, there are other
factors in play, most notably the reemergence of the U.S. oil industry as the
price of crude rises.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Interestingly, the biggest hindrance
to future growth is lack of available workers. The reasons include:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">- Structural Unemployment: Some
available workers do not have the skills and training needed for the jobs being
created.<br />
- Cultural: Many younger workers prefer not to work in factories or in manual
labor-type jobs.<br />
- The Opioid Epidemic: A significant number of potential workers are addicted
to pain medication (opioids) or cannot pass an employment drug test.<br />
- Increased Safety Net: After the Great Recession, there were increased social
welfare payments, then expanded health insurance benefits. This acts as a
disincentive for some potential workers.<br />
- Immigration Enforcement: Some undocumented workers left the country due to
immigration laws being enforced.<br />
- Demographics: The “Baby Boom” generation is retiring, and more workers are
needed to replace them.<o:p></o:p></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-zxCOQBfu-BU/WkZnr5V2mMI/AAAAAAAAGlc/Q2Uy-OmI-C8AZ6iVLaWa6Ng48eiKrb3EQCLcBGAs/s1600/truck.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="733" data-original-width="1600" height="146" src="https://4.bp.blogspot.com/-zxCOQBfu-BU/WkZnr5V2mMI/AAAAAAAAGlc/Q2Uy-OmI-C8AZ6iVLaWa6Ng48eiKrb3EQCLcBGAs/s320/truck.jpg" width="320" /></a></div>
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<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
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<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";">The Trucking Industry<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">A Much-Improved Business Climate<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">In March, just two months after
Trump’s inauguration, the president of the American Trucking Association, ten
leading industry executives, and twelve truck drivers were Trump’s guests at
The White House. They discussed issues affecting trucking. They also brought
along a high-tech truck/trailer combination in which the president was
photographed sitting in the driver’s seat. This was a clear signal of a much
friendlier business climate for the industry. The previous administration was
perceived to view trucks as something that polluted the air and endangered the
highways, and thus heavily regulated the industry.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Freight Growth Accelerates<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Naturally, the improved U.S. economy,
and especially manufacturing, generated significantly more freight. Freight
growth was 2.9% in Q1 and has steadily accelerated throughout the year. Growth
is forecast at an impressive 4.6% in Q4, which would bring the total year to 3.6%<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
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<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Trucking Capacity<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">After years of slower, manageable
growth, fleets struggled to increase capacity. FTR (Freight Transportation
Research) estimates Class 8 truck utilization at 95%, much higher than the
historical average (88%). Capacity utilization is expected to tighten over the
next year, reaching as high as 97%. This has caused problems for shippers who
are having problems finding trucks to make on-time deliveries.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Freight Rates<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Freight rates have steadily risen as
capacity has tightened. Loads and rates in the “spot market” (non-contract)
have spiked as shippers seek carriers outside their normal channels to prevent
late deliveries. Contract freight rates have not increased very much, but will
when the new contracts are negotiated.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Regulations<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The Trump administration did not
revoke the requirement for Electronic Log Devices (ELDs), which becomes
effective in December. This is because ELDs are a safety measure which ensures
drivers follow the already established Hours-of-Service regulations. There has
been an extension of when the ELD mandate will be enforced, however.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Most large fleets have already been
using ELDs, however many small fleets are waiting until December to implement.
History has shown ELD implementation can reduce a fleets productivity up to 10%
in the short-term and then around 2-4% after that.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The regulations on trailers regarding
the mandated use of glider equipment (tails and skirts) to improve fuel
efficiency has been put on hold and is expected to be repealed. Other proposed
regulations on trucking have been put under review. However, some
safety-related ones may survive.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Driver Shortages<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The increase in freight, the loss of
productivity, and the retirement of aging drivers has created a high demand for
new truck drivers. However, the tight labor market, discussed previously, and
the undesirous nature of the job threatens to push the driver shortage to
crisis levels. Some fleets already have brand-new trucks parked because they
can’t find drivers for them.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Crunch Time<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Combine the strong freight growth,
productivity loss due to ELDs and a severe driver shortage, and the potential
exists for an industry crisis early in 2018. It is difficult to predict the
impact or the industry response to this unprecedented circumstance, but
shipping disruptions will occur.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";">Commercial Equipment Markets<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Class 8 Trucks<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Class 8 truck sales weakened at the
end of 2016, and some forecasters, though not FTR, expected the market to
suffer a serious correction. However, after the uncertainty over the
presidential elections faded and the surge in economic confidence occurred,
sales came out of their tailspin and began a steady, moderate recovery.
Overall, 2017 production will be decent (248,000 North America) with the second
half build much higher than the first. The 2018 forecast is for 300,000, as the
2017 momentum is expected to roll into 2018, based on the factors listed
previously.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Commercial Trailers<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The North American commercial trailer
market had another fantastic year. Production for 2017 is expected to come in
at 315,000, a 2% increase from 2016. The trailer market has been
uncharacteristically running ahead of the Class 8 market since the third
quarter of 2016. This is because fleets were behind in their replacement cycles
after the Great Recession. Many dry vans were parked for an extended period as
the slow economic recovery continued. This disrupted trade cycles well into
2017.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Fleets are also buying more dry vans
to compensate for reduced productivity due to regulations and the driver
shortage. The use of drop-and-hook, dropping off one trailer and hooking up a
different trailer, has become commonplace. Refrigerated vans and flatbeds also
are increasingly doing this.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: Arial, sans-serif;"><span style="font-size: 14pt;">Refrigerated vans have </span><span style="font-size: 18.6667px;">benefited</span><span style="font-size: 14pt;"> from
a large increase of “temperature-controlled” freight such as pharmaceuticals,
medicines, and chemical-sensitive products, etc. Consumer preferences for both
fresh and frozen foods have also created more freight moves.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Flatbed (platform) trailers started a
strong comeback in 2017. The growth of the industrial sector and the
regeneration in the energy markets is creating more flatbed demand.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">2018 Outlook<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 27.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 2;">
<b><span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Next year should be more of the same
for the North American commercial vehicle market. GDP is forecast at 2.9%. This
could go even higher if tax reform is accomplished. Freight will continue to
grow, just not at the robust pace of the last two quarters.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">This should keep equipment demand
vibrant next year. The North American Class 8 build is forecast to come in at
300,000 units, with trailers at 312,000 (down slightly from 2017).<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.05pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 3;">
<span style="color: #333333; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The big concern is capacity
constraints. Freight growth and reduced productivity mean more trucks and
trailers will be needed. Where the drivers come from to operate the additional
trucks is unknown. This does have the potential to crimp equipment purchases in
the short-run. It will be interesting to see how this problem gets resolved.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
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Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-13149698398321605492017-12-13T08:19:00.001-08:002017-12-13T08:19:49.372-08:00Smooth Sailing But The Winds Are Calming<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: Arial, sans-serif;"><i><span style="font-size: 14pt;">Note: This post </span><span style="font-size: 18.6667px;">originally appeared of the FTR blog in November. Some of the economic indicators have been updated since then, however the conclusions and substance of the analysis </span><span style="font-size: 14pt;"> have not changed.</span></i></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">GDP has been above
3% for two straight quarters! Business people are giddy with excitement, as
business conditions and confidence are at their highest level since the Great
Recession. CEOs all the way down to factory workers are hopeful the economy has
broken through seven years of the slow-growth recovery and will get even better
in the future.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Early this year, the
forward-looking economic indicators pointed to higher growth, or 3% GDP, for
part of 2017. This combined with antidotal evidence from various industries was
my basis for predicting higher economic growth this year. In this case, the
view from the ground, talking with knowledgeable business people, was more
accurate than the view from the air, the economists.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">But where are we
now? Are we headed higher or not? It’s time to revisit the indicators to see
how 2018 will begin.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 2; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><b>Leading Economic
Indicators</b><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The ECRI Weekly
Leading Growth Index has been declining since peaking in February. It hit 0.8
in September. That was hurricane related, however, because it recovered to 3.2
in October. Similarly, the Conference Board Leading Economic Index has been
slightly weaker than earlier this year, and the storms actually put it in
negative (-0.2) territory in September.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Although these
indicators have weakened, they are still giving positive readings. This is good
news in that economic growth should continue into 2018. However, they are not
forecasting stronger growth ahead, but a moderate slowdown.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>Manufacturing</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The ISM October PMI
for manufacturing was a sturdy 58.7, down 2.1 percentage points from September.
However, the forward-looking components of the index remain vibrant. The New
Order number was at 63.4%, and backlogs remain solid at 55. In addition,
customer inventories are regarded as too low.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Factory orders are
growing again after flattening out in the summer. Data from the Philadelphia
FED show manufacturing activity at a strong and steady rate for the past six
months. Most commodity prices are much higher than a year ago.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">This data indicates
there is solid support for manufacturing activity in the short-term. It also
says there is not impetus present which would push things much higher.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>Housing</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Building Permit data
has been basically flat for the past year. The NAHB Builder Confidence Index
remains elevated, but hasn’t changed much over the last 12 months. It appears
housing with be neither a drag nor a boost to economic growth in 2018.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>Business/Economic Confidence</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The surveys from
Gallup and Moody are still at positive values, just not at the high levels from
earlier this year. This is not surprising since expected changes are moving
much slower than people anticipated.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>Consumers</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Consumers are still
consuming at favorable rates. Unemployment is low, and hiring is forecast to
continue at steady. The Conference Board Help Wanted OnLine measure increased
by 81,500 listings in October. However, my measurement of discretionary
spending has been very flat since March. This indicates wages aren’t growing
much beyond increases in expenses.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>Transportation Equipment Market</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">Both the Class 8 and
commercial trailer markets have slowed some after being robust through
September. The pause was unexpected due to freight fundamentals remaining
strong; however, it is consistent with the trends of the indicators detailed
above. Both markets are expected to regain their momentum early in 2018.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>Conclusion</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444;"><span style="font-family: Arial, sans-serif; font-size: 14pt;">Based on the
indicators and data, it does not appear the economy can maintain its +3% growth
rate in the medium-term. The good news is that even though the numbers have
weakened some, they are still in positive territory. </span></span></div>
<div class="separator" style="clear: both; font-family: Arial, sans-serif; font-size: 14pt; text-align: center;">
<a href="https://3.bp.blogspot.com/-_nAyWEhRQ-c/WjFSRYGUkVI/AAAAAAAAGks/-SK9PlEfVTMdzVcvP7KF8tloU7-co9bcwCLcBGAs/s1600/sailboat.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="768" data-original-width="1024" height="150" src="https://3.bp.blogspot.com/-_nAyWEhRQ-c/WjFSRYGUkVI/AAAAAAAAGks/-SK9PlEfVTMdzVcvP7KF8tloU7-co9bcwCLcBGAs/s200/sailboat.jpg" width="200" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">Therefore, the economy
should slow very modestly. It looks like we are still locked in a range where
GDP increases moderately and then falls moderately. The difference now is that
it is fluctuating at a somewhat higher range, peaks above 3%, than previously.
So, it is good news, just not great news.</span><br />
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>The Economists View</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b><br /></b></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">As a double check, the Wall Street
Journal Economists Survey predicts a Q4 GDP of 2.8% and a 2018Q1 of 2.4%. The
first quarter has been weaker than expected the last few years, so a drop to
2.4% seems reasonable. However, 12% of the respondents are forecasting a Q1
growth of over 3%.<br />
The recent economic news (since this survey) has been very positive. The
“bounce-back” from the hurricanes is providing an economic boost. Now 3% GDP in
Q4 looks probable.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="line-height: 21.6pt; margin-bottom: .0001pt; margin-bottom: 0in; mso-outline-level: 2; vertical-align: baseline;">
<span style="border: none windowtext 1.0pt; color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"><b>The Call</b></span><span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 22.15pt; margin-bottom: .25in; margin-left: 0in; margin-right: 0in; margin-top: .25in; mso-outline-level: 3; vertical-align: baseline;">
<span style="color: #444444; font-family: "Arial",sans-serif; font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">We will top 3% GDP
in Q4 due to hurricane recovery and then drop below 3% in Q1. The economy
should then resume it’s favorite “recovery” range between 2% to 3%. Of course,
tax reform is the current wild card.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<br /></div>
Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-49082764863056987972017-10-30T06:34:00.000-07:002017-10-30T06:34:33.747-07:00Super Gridlock is Super Good for Business<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">A panelist at the recent FTR (Freight Transportation Research) Transportation Conference
reminded us that businesses like it when the government stays out of “their
business.” He said companies were benefiting from the new “hands off”
environment. He claimed this had improved business confidence, and, more
importantly, business performance.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">We have seen these conditions before, usually when power in
Washington has been divided between the political parties, creating gridlock. Often
this results in the government not being able to accomplish much, a
“libertarian paradise.” Libertarians would argue that government actions to
spur economic growth are often wasteful and ineffective. They also claim
regulations, even for noble purposes, are often poorly designed and lead to
harmful unintended consequences.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Our current jumbled, toxic, political environment, while
harmful in many areas, has created a favorable business climate. This is beyond
gridlock, this is super gridlock. Instead of two factions fighting for power,
you have three. This is an economic and not political discussion, so I will not
get into the motives of the Democrats and the divided Republicans. </span><br />
<div class="separator" style="clear: both; text-align: center;">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><a href="https://3.bp.blogspot.com/-wxVSA-ZjdNg/WfcqMITt_6I/AAAAAAAAGS4/MIyuiDJ2UL0FLyKYHjCcrX6s89CDsq85ACLcBGAs/s1600/gridlock_1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="363" data-original-width="644" height="180" src="https://3.bp.blogspot.com/-wxVSA-ZjdNg/WfcqMITt_6I/AAAAAAAAGS4/MIyuiDJ2UL0FLyKYHjCcrX6s89CDsq85ACLcBGAs/s320/gridlock_1.jpg" width="320" /></a></span></div>
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">However, if companies love gridlock, they are absolutely
giddy about super gridlock. Businesses prefer conditions that are stable and
favorable and a government which does nothing to impede growth. And now the
government is actually doing less than nothing. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">There have been over 800 regulations cut or delayed in the
first six months of the new administration. Furthermore, there has been a crimp
placed on any new regulations. From a purely economic perspective, this is
creating an extremely favorable business environment. It appears now that it is
the government being regulated and not businesses. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Soon after the election, business confidence indexes
spiked. At the time it was uncertain if this renewal of hope would have any
positive outcome on the economy. Would survey results in December eventually
turn into dollars? For a while, it looked doubtful, even as the survey numbers
remained high. Now it would appear that we have the answer. Yes, the increase
in business confidence is beginning to have a positive impact. We just had to
wait; Tom Petty was correct, “The waiting is the hardest part.”<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">At FTR we constantly talk to manufacturers about business
conditions, because manufacturing is so tightly connected to freight. Several
producers from different industries said they noticed a definite upturn in
business in June. A speaker at a recent forum I attended said his bank had
noticed a recent surge in small business investment. Anecdotal information is
always difficult to process, but now it looks like these statements were valid.
<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The ISM Manufacturing Index rose to 60.8 in September, the
best reading since May 2004. Let this sink in for just a moment. The index says
that U.S. manufacturing conditions are at the most positive level in 13 years.
In addition, the ISM Services Index is at a 12-year high. My contact in the
precision machined products industry says that business spiked near a record
high in June, fell some in July, but recovered in August. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Some analysts are saying the hurricanes boosted the
September ISM manufacturing number, so watch the October reading carefully. However,
the inventory reading of the ISM was low. This means sales are running ahead of
production, so production needs to increase. The hurricanes should not have a
substantial hit on GDP, the experts say only 30 to 50 basis points in the
short-term, with a boost later. The Wall Street Journal economists survey is forecasting
GDP growth of 2.7% and 2.5% for Q3 and Q4, respectively. Add the 50 basis
points back to Q3, and you get 3.2% GDP. (Now the first GDP estimate is 3.0%, then add .5 and you get 3.5% without hurricanes!) Not too shabby.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">Oddly, the biggest hindrance to future growth is lack of
workers. The official unemployment rate is down to 4.2%, and large numbers of
people are out of the workforce due to opioid abuse, lack of technical skills,
and disdain of manual labor. The trucking industry will face this challenge in
a few months as more drivers will be needed to haul the growing demand for
freight. This, and reduced productivity due to ELDs (Electronic Log Devices), could stress trucking
capacity to the max.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 14.0pt; line-height: 107%;">The economy has increasing momentum entering 2018. If
Congress is able to pass tax reform, it will give business another huge boost. However,
don’t get too exuberant just yet, not with super gridlock still in place.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<br /></div>
Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0tag:blogger.com,1999:blog-3082934253265791360.post-34544744968063807062017-09-11T13:25:00.000-07:002017-09-11T13:26:14.307-07:00Living in Boomtown?<div class="MsoNormal">
<b><span style="font-size: large;">Things appear to be
booming:<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-size: large;"><br /></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->3% GDP growth in Q2. The word on the street turned
out to be more reliable than the economists’ forecasts.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Unemployment rate of 4.4%. Economists set “full
economic employment” at 4%, because it is estimated that at any time 4% of the
labor force is in some form of transition. Unemployment at 4.4% indicates there
are jobs available for anyone who wants them. However, this is more complicated
in the current job market. There are jobs available which people don’t want
either because the wages are insufficient, the safety-net is too safe, they do
not prefer manual labor, or the jobs don’t match up to their college degree. There
are also open jobs which require a level of technical skill lacking in the
available labor pool.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Consumer confidence spiked in August to the
second highest level since 2000. The job market is growing, home prices are
rising, and the stock market is booming. Times may not be as good as 2000, but
it’s much better than 2009.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Consumers are opening their wallets. Retail
sales were up 0.6% in July, and the consumption numbers in the last GDP report
were strong. West Coast port activity is up over 10% this year.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Manufacturing is also steady, with the August
PMI index hitting an impressive 58.8%.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Miles driven increased 1.2% y/y in June and 2.2%
in May. More people are driving to work and more people are going places, both
signs of increased economic activity.<o:p></o:p></span></div>
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<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Truck freight is sturdy. The FTR forecast is for
3.4% growth for 2017, including an impressive 4.2% y/y growth in Q4.<o:p></o:p></span></div>
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<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->New Class 8 truck and commercial trailer demand
are flashing strong positive signs now, and healthy demand is forecasted to
continue into next year. <o:p></o:p></span></div>
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<span style="font-size: large;"><br /></span></div>
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<b><span style="font-size: large;">And looking outside my window:<o:p></o:p></span></b></div>
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<b><span style="font-size: large;"><br /></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Help wanted signs are popping up everywhere. There
are two adjacent restaurants with banners near the street competing for
workers. There are radio ads for skilled factory workers and truck drivers.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->The new office complex near my house finally has
some tenants. There still are not many cars in the parking lot, but it appears
three out of five offices are occupied.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->The “economic warzone,” which I have previously
written about, is not fully recovered, but I now doubt that it ever will be. The
abandoned buildings are too old, and new construction provides more attractive
options for new businesses. However, traffic through this area has greatly
increased.<o:p></o:p></span></div>
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<a href="https://3.bp.blogspot.com/-BW-lPSla3i4/Wbbw09wcMxI/AAAAAAAAFSo/NuY9Zsl4BQY9rai0sYOj0yg49OXuOFPZACLcBGAs/s1600/money-picture.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="902" data-original-width="902" height="200" src="https://3.bp.blogspot.com/-BW-lPSla3i4/Wbbw09wcMxI/AAAAAAAAFSo/NuY9Zsl4BQY9rai0sYOj0yg49OXuOFPZACLcBGAs/s200/money-picture.png" width="200" /></a><span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Likewise, traffic on the local highways seems
much heavier than a few years ago.<o:p></o:p></span></div>
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<span style="font-size: large;"><br /></span></div>
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<b><span style="font-size: large;">Yes, it looks like
boomtown! But how long will this last?<o:p></o:p></span></b></div>
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<b><span style="font-size: large;"><br /></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->The optimist says this is the surge we have been
waiting on for eight years. There is renewed confidence, a more
business-friendly administration and tremendous pent-up demand. This is the
start of something big!<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->The pessimist says this looks a lot like the top
of an economic cycle. Everything appears great right before the slide begins. This
recovery has lasted much longer than expected, and we are due for a drawback. Things
look good now, but you never see it coming.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-size: large;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: large;">-<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->The Wall Street Journal Economists Survey Panel
expects growth to fall back to around 2.5% for the next several quarters – but
you expected that, right? It is higher than the 2.2% the economy had been stuck
at previously. Only 21% of the economists forecast growth at 3% or more in Q3
(before Harvey and Irma). The FTR GDP forecast is close to 3%.<o:p></o:p></span></div>
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<span style="font-size: large;"><br /></span></div>
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<b><span style="font-size: large;">The Call <o:p></o:p></span></b></div>
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<b><span style="font-size: large;"><br /></span></b></div>
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<span style="font-size: large;">In this mixed-up economic environment, it is unusually
difficult to forecast. That’s why the economists have resorted to predicting
“more of the same” for a while. You can’t fault them since most of the
forecasts have been good. <o:p></o:p></span></div>
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<span style="font-size: large;"><br /></span></div>
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<span style="font-size: large;">When it’s this murky, I tend to be biased towards the
transportation markets because they have been reliable economic indicators. These
markets say there are more blue skies ahead. Of course, there were blue skies
in Florida just last week. You never see it coming ……<o:p></o:p></span><br />
<span style="font-size: large;"><br /></span></div>
<span style="background-color: #e0e0e0; font-family: "arial" , sans-serif; font-size: 14pt; line-height: 19.97px;"><span style="color: #333333;"><i>This post first appeared on the FTR website with minor changes here.. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please </i></span></span><span style="background-color: #e0e0e0; font-family: "arial" , sans-serif; font-size: 14pt; line-height: 19.97px;"><a href="http://transportation.ftrintel.com/acton/attachment/6794/u-000b/0/-/-/-/-/" style="color: #666699;"><i>click here</i></a><i><span style="color: #333333;">.)</span></i></span><br />
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Don Akehttp://www.blogger.com/profile/06268533664760244722noreply@blogger.com0