MISSISSAUGA, Ont. -- Despite all the negativity on the news, and the uncertainty involving the US debt ceiling, most trends are pointing to a steadily growing economy that bodes well for trucking’s future.
That was the synopsis from leading economists and industry analysts speaking at the 2013 Surface Transportation Summit here today. Carlos Gomes, senior economist with Scotiabank, has earned a reputation for being more upbeat than many of his peers. He remained that way this morning.
“I generally have been very positive over the past several years and I still remain positive with respect to the outlook,” Gomes said.
Globally, Gomes said the economy has been improving throughout the year, led by emerging markets in China, India and Brazil. “They have moderated as well, but they continue to grow in excess of 5%, while the global economy is closer to 3%,” Gomes said of emerging markets.
Even Europe, which has been an economic anchor in recent years, returned to positive growth in the second quarter, Gomes noted.
China saw some moderation in economic growth last year, but it has enjoyed double-digit growth in late 2012 and into 2013, “which is telling us the slowdown in China that was expected to last several years is coming to an end.”
Job growth is improving in the US, by about 2% year-over-year. That’s a leading indicator Gomes watches closely.
“Employment growth went negative a full year before the recession began,” he pointed out.
Here in Canada, Gomes characterized the economic picture as “more mixed.”
“Coming out of the downturn, we had a significant improvement both in manufacturing shipments as well as building permits,” Gomes said, noting growth has since moderated. Canada still relies heavily on the US for 70% of its exports.
Gomes acknowledged Canadian household debt is a valid concern, but that it may not be as dire as it seems. Canadians now carry a debt-to-household income ratio of nearly 160%, which is higher than in the US is today, and about equal to where US debt loads sat before the recession.
However, thanks to low interest rates, debt charges account for just 7% of disposable income in Canada, a figure that was in excess of 9% in 2008 and as high as 12% in the 1990s. Interest rates would have to climb by 100 basis points to bring the debt charges as a percentage of disposable income to its average rate of 8.5%. So while Canadian household debt is high, Gomes said it’s manageable as long as interest rates remain low.
Charles Clowdis Jr., managing director, North American markets with IHS Global Insights, said he was “embarrassed” by what the impasse in Congress over the debt ceiling threatens to do to the economy. He said a quick resolution should prevent any lasting damage, but that it could interrupt some positive momentum with leading indicators such as housing and consumer confidence.
“Until two weeks ago, we were cautiously optimistic,” about the economy, Clowdis said. “We’re still cautiously optimistic.”
Focusing on transportation, Clowdis said he’s seeing evidence of near-shoring, with as much as 5% of manufacturing that was moved to Asia, returning to North America, usually to Mexico. This bodes well for trucking and rail providers, he noted.