Today’s Pickup: Economy may slow below 3% GDP in 2018

Expectations of GDP growth above 3% in 2018 may not occur as economic growth settles back into a 2-3% range. (Photo: Shutterstock)

Expectations of GDP growth above 3% in 2018 may not occur as economic growth settles back into a 2-3% range. (Photo: Shutterstock)

Good day,

Could the economy be starting to slow? That is a conclusion that FTR’s Don Ake has drawn after reviewing a number of economic indicators. Ake is quick to note that while it may be slowing, it is not heading for a recession. He bases his evaluation on current GDP growth and what he thinks will be coming in 2018.

GDP has topped 3% in each of the past two quarters and is expected to be above that mark in the fourth quarter, but Ake believes it will retreat slightly in 2018 to its “favorite ‘recovery’ range between 2% and 3%,” aside from any impact related to tax reform.

“Based on the indicators and data, it does not appear the economy can maintain its +3% growth rate in the medium-term,” he writes. “The good news is that even though the numbers have weakened some, they are still in positive territory. 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.”

To support his view, Ake noted a number of economic indicators, including the ECRI Weekly Leading Growth Index, which has been declining since February, he says. The Conference Board Leading Economic Index is also slightly weaker than earlier this year, Ake adds.

Manufacturing indexes, while still strong, have also dropped recently with the ISM October PMI down 2.1 percentage points from September. Inventories, though, are considered low, he notes, and factory orders have started growing again after remaining flat during the summer.

“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,” Ake says.

New housing building permits have remained flat for most of this year and business confidence remains positive, but is slipping a bit from earlier this year. Consumers continue to remain positive, unemployment is low and hiring is forecast to remain steady, but that is not translating into wage growth.

“My measurement of discretionary spending has been very flat since March,” Ake says. “This indicates wages aren’t growing much beyond increases in expenses.”

While Ake still sees a positive 2018, he doesn’t see high 3%-plus GDP forecast some are predicting.

Did you know?

The value of cross-border freight hauled by trucks in September increased 2.9% according to the Transportation Department. Trucks hauled 64.3% of all freight for a total value of $31 billion.  

Quotable:

“The good news is that even though the [economic] numbers have weakened some, they are still in positive territory. 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.”

- Don Ake, FTR

In other news:

Tax overhaul has companies lining up for credits

The Republican rewrite of the tax code includes hundreds of tax breaks for specific industries, and businesses are lining up to ensure their industry gets one. (Wall Street Journal)

Ahead of ELD mandate, log violations increase

Roadside inspection data shows an 11.5% increase in citations for drivers falsifying logs in fiscal year 2017 and there was a 14.8% increase in out-of-service orders as a result. (Journal of Commerce)

Cross-border freight increases again

For the 11th straight month, the value of cross-border freight increased, rising 3.6% overall, with trucks carrying 2.9% more. (Heavy Duty Trucking)

Carriers dropping slow shippers

Some carriers are ramping up efforts to drop shippers are refuse to work to speed up the loading process, concerned about the impact over the ELD rule on driver’s hours. (Trucks.com)

Diesel prices remain on the rise

The U.S. average retail price of diesel fuel increased 1.4 cents last week to $2.926 a gallon, according to the Department of Energy. (Transport Topics)

Final Thoughts

The Republican-held Senate is working feverishly today and tomorrow to prepare a tax plan for vote later this week. There is some indication that several Republican senators are not onboard with the plan and leaders have been working to adjust the bill to get their votes, according to reports. The result is a tax bill that may look different from what has been reported previously.

Hammer down everyone!

Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.