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ACT: Trucking Faces Headwinds in 2020

Business conditions in 2019 have been more challenging for carriers last year, with more projected sluggishness in 2020, said ACT Research President Kenny Vieth, who lead an economic session at CCJ‘s Solutions Summit in Scottsdale, Arizona.

Tax cuts in 2017 boosted activity last year, but tariffs threw cold water on it mid-year and accelerated the U.S. economy’s return to a more normal trend during 2019, he explained.

“In the first quarter of 2018, the world was awash in manufacturing good news,” he said, adding tariffs quickly started to suppress that growth. “Tariffs have been the driver in slowing down the entire global economy.”

Tariffs and a looming trade war raise the risk of an economic recession, added Vieth, who noted that an industrial recession is already underway in the U.S., which has led to a freight recession across all segments.

“The evidence overwhelmingly suggests 2020 is going to be a very, very tough year,” he said. “Freight recovery is dependent on the speed at which equipment supply and freight demand are brought back into line.”

Active capacity is up 10% over early 2018 – the fastest fleet capacity growth since 1999 – but Vieth said re-emerging productivity trends negate a still-growing economy.

Freight down markets, Vieth said, tend to last from 1 to 2 years, and added “we’re really a full year into this at this point.” He expects freight to stabilize, perhaps even grow, in 2020 and into 2021.

The resolution of trade stalemate between the U.S. and China, Vieth said, has a high upside for trucking as it would “accelerate the global economy, spurring a strong rebound in commodity pricing and machinery demand.”

Vieth said he expects the economy to return to 2% GDP growth in the second half of 2020, pegging the probability of a recession at 30-35%. However, Vieth noted the slow growth economy – and its susceptibility to swings in trade struggles – are key drivers in a potential recession threat.

“The slower something [the economy] moves,” he said, “the easier it is to stop it.”

Full CCJ story here.

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