What’s the economic outlook for shippers and carriers?

In the second quarter of 2020, the pandemic plunged the U.S. gross national product into an unprecedented drop of 32.9%. Yet, shippers and the transportation industry have plenty of reasons for guarded optimism about the economy’s outlook for the second half. 

Durable-goods orders and U.S. imports have been spiking up in recent months. Last week’s Outbound Tender Volume Index indicates shippers’ high demand for trucking capacity is continuing. Plus, many publicly-owned carriers are reporting higher earnings.

Meanwhile, the latest rail carload data for raw materials, a leading indicator of future truckload activity, is recovering from depressed levels from early months of the pandemic. And fleet owners are showing enough confidence in the economy to increase their orders of Class 8 vehicles (rated for weights over 33,000 pounds).

All of this happened while the industrial sector has been relatively soft—but that may be changing. 

The Richmond Fed Manufacturing Activity Index jumped up in July. The Institute of Supply Management’s Manufacturing Index, a key gauge of economic activity, has been signaling economic expansion for two straight months. 

Moreover, the Purchasing Manager’s Index, after cratering in April and May, surged to its highest value since April 2019.  The PMI, which is based on a monthly survey of supply chain managers, measures the prevailing direction of economic trends in manufacturing.

Experts warn that we’re not of the woods yet. As FreightWaves analyst Zach Strickland noted last week, “If 2020 has taught us anything, it is that the world as we know it can change in an instant.”

The three keys to watch in coming weeks:  employment trends, approval of a new economic stimulus package, and, of course, pandemic developments. 

In a statement last week, the Federal Reserve’s Open Market Committee said the pandemic “poses considerable risks to the economic outlook over the medium term.”  The Fed promises to use its “full range of tools” to support the economy,

Whatever path the economy takes, AJC Logistics is with you. Our message to Fortune 500 shippers remains constant: Challenge us with your most difficult lanes. And trust us to deliver on time, intact, every time.

Sources: Bloomberg, CNBC, Charles Schwab, FreightWaves, FleetOwner, Bulktransporter, MarketWatch.