Last Thursday, the U.S. Bureau of Economic Analysis reported that gross domestic product (GDP) grew at a 2.7% annual rate during the third quarter of 2012, which was an upward revision from the preliminarily reported annual growth rate of 2.0%. At a first glance, this appears to be good news, but as economist James Hamilton points out, a more thorough reading of the report shows that the U.S. economy is “growing a slower rate than any of us would like.”
In particular, 0.8 percentage points of the growth in GDP translated into increased inventory accumulation, and 0.7 came from higher levels of defense spending. Excluding these factors, Q3 GDP grew at a measly 1.2% annual rate. Hamilton reasonably anticipates that GDP will continue to grow at below-average rates during 2012Q4 and in the near future.
For the trucking industry, I find the increased accumulation of inventories to be the most concerning aspect of this report. As shown in the below figure, U.S. total trade inventories increased by $135b, or 9.1%, from March 2011 through September 2012 (the most recent month currently reported by the Census Bureau). Over the same time period, total retail sales actually declined by $17b, or 1.4%. Basically, retail sales have been largely flat for nearly two years, while inventories have steadily accumulated.
I have discussed the problems of increased inventory accumulation previously on this blog, and it remains troubling for trucking to have increasing production volumes be simply stashed in warehouses.
New orders for durable goods (products with a useable life of at least three years) remained flat during October (.pdf), as did new home sales (.pdf). Moreover, consumer confidence improved by only 0.6% during November.
Recently, the American Trucking Association reported that truck tonnage declined by 3.8% in October, the first year-over-year drop since November 2009. Clearly, the trucking sector is in need of a positive shock to demand. A possible source for such a shock is much less clear.
Internet Truckstop Economist