A recession is two consecutive quarters of declining growth, according to economic definitions. First, railroad shipments and profits are down, and the trucking industry isn’t selling many new trucks (tractors) or trailers. Since that time, we’ve observed some problems in the US. There was an interesting article in the AP recently titled;
“CSX Predicts Challenging Year For Railroad In 2016” by Josh Funk (AP Business Writer) on January 12, 2016 and it was republished in Manufacturing.Net online news which stated: “The continued low demand for coal and crude oil combined with the robust U.S. economy will cause CSX Corp. to anticipate lower profits in 2016. dollar continues to limit exports. According to the railroad’s forecast, freight volume will be down overall in the U.S. economy may be slowing after several years of steady growth. We’re calling it almost a freight recession,” Michael Ward, the chairman and CEO, said on Wednesday. “The industrial sector of the economy, in our opinion, faces some difficulties.”
In the Wall Street Journal there was another piece that scares those of us who really understand the economy and how it really works; “Big Rig Buyers Slam On The Brakes,” by Brian Baskin on January 7, 2016 which stated:
“Trucking companies are buying fewer vehicles amid lackluster demand for hauling freight, triggering job cuts amongst equipment manufacturers and leaving near record-number big rigs gathering dust on dealership lots,” and “According to information gathered by industry research firm FTR, orders for heavy-duty trucks fell 37% in December over the same month in the previous year.”
You see, while everyone is focused on issues like China, the stock market, the conflict in Syria, the price of oil, and US primary politics, no one seems to be looking at the economic fundamentals of where we really are. We’ve heard that the US GDP is growing at an annualized rate of about 2%, that unemployment is low, etc. but most of those numbers are not very reliable. Although there have been some success stories, such as automobile sales and airline profits due to low oil prices, the retail Christmas season was only average, not great, and despite the claims to the contrary, things are not at all as rosy as they appear to be in this country.
When things go wrong, we can’t just turn a blind eye to the economic fundamentals and ignore the problem. It’s time to point out the flaws in the optimism propaganda when we notice them. The recovery from the 2008 recession was the worst recovery we’ve ever experienced, and now that up-cycle seems to be coming to an end, our trading partners are in trouble, and there isn’t a central bank big enough to save everyone or stimulate us out of the impending train wreck. Pay attention because 2016 is going to be a very interesting year.