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U.S. can expect a "bumpy ride" in 2014

WASHINGTON D.C.: U.S. GDP growth has not yet translated into an increase in freight volume according to the January 2014 CASS freight index.

Report author Rosalyn Wilson says there are additional signs of a sluggish turnaround: The Institute for Supply Management's purchasing index (PMI) fell for a second month from 56.5 in December to 51.3 in January; there was a 13.2 point drop in the new orders index, the largest drop in new orders in 33 years; and China's PMI also declined and now sits at 50.5, just 0.5 points 
above the 50 point mark indicating growth or contraction.

Wilson adds that new U.S. export orders fell from 49.8 to 49.3 during the month while imports have also slowed – not good news for a freight industry already hit by bad weather during January.

AmericanAirlines737800newlivery-copyInternational trade data released this week by the U.S. Department of Commerce show that exports reached $2.3 trillion in 2013, up nearly $700 billion since 2009. The U.S. trade deficit improved $63.1 billion from the past year to $471.5 billion, the lowest since 2009. Merchandise exports to the 20 economies that have trade agreements with the United States reached a record $732.0 billion.

While Wilson acknowledges that many observers think the U.S. economy will gain momentum in 2014, she's not so optimistic: "There are still some strong headwinds to overcome in the freight sector, the most obvious of which being the nearly imperceptible growth in volumes."

Despite Commerce Department statistics, she says the global marketplace remains weak and U.S. exports are lagging expectations. While unemployment level continue to fall to an official 6.7 percent – the lowest since October 2008 - she thinks the level of new jobs created each month is not enough to sustain the economy.

"As the Federal Reserve reduces its bond purchases, interest rates will continue to rise. This will have repercussions in the freight sector. The inventory levels that are now higher than those during 2009, when carrying costs were minimal, will become more burdensome and will probably lead to a drawdown similar to what we saw during the recession."

Wilson says obtaining credit to purchase new vehicles will become more difficult this year, "probably squeezing out smaller and marginal trucking companies that don't have the capital to expand their fleet or ‐ almost as important ‐ modernize their fleets. Continue to expect a bumpy ride."

 

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