Trans4Cast – Economic Outlook: Stable Growth … with Risks

By | November 16, 2017

Recent webinars in the FTR State of Freight series have focused on the outcomes for economic growth in 2018, along with a discussion of some of the inherent risks. Overall, the consensus is that the economic outlook looks healthy for 2018.

In addition to getting the valuable opinions of FTR’s Industry Experts, we also like to find the ‘wisdom of the crowd’ and we ask our attendees to answer a pertinent question at the start of each webinar. The latest results from those poll questions are in the charts above. I think that there is a clear conclusion to be drawn from the results, but let’s start by looking at each one individually.

Economic Outlook

We have a clear front-runner for 2018: “More of the Same”. Not a great campaign slogan, but certainly good news for those of us in transportation. FTR’s Economic Expert, Bill Witte, highlighted that the recent performance could actually lead to a slightly better outcome than recent history. FTR is leaning slightly more heavily towards better-than-expected performance in 2018. Prepare your 2018 plans accordingly.

Here’s the quick outlook highlights:

  • More than 50% of respondents listed ‘More of the Same (2-3%)” as their expected outcome for 2018 GDP growth.
  • Hurricane recovery has small, but notable, positive impacts through Q1, less noticeable after that.
  • Continued growth for the rest of 2018 that is slightly above the recovery norm (2.8% vs 2.2%).
  • Employment growth is stable, but not accelerating, in the 175,000 range.

Economic Risks

Despite the positive tone set by the economic expectations for 2018, we still have some significant risks that could drastically alter the outcome in the years ahead. Luckily most of those forces are more problematic the farther we go out, so 2018 still has strong probabilities of seeing the same or better growth.

Here’s the quick risks highlights:

  • The biggest risk factor for 2018 is clearly stated in the poll results: Politics is becoming more corrosive. The old Washington adage was ‘inaction is the best result’. That seems less likely to persist as we move into 2018. Tax reform seems quite unlikely – even tax cuts seem very difficult in the current environment.
  • Sovereign debt remains one of the biggest downside risks for economic growth, but the chances of action in 2018 are very limited.
  • Financial markets are ‘frothy’ but not likely to dramatically impact the Main Street economy.
  • Current oil markets (stable in the $50 range) are a net positive for the US. A dramatic altering of the status quo could have notable consequences.
  • Lack of wage growth continues to perplex. Further acceleration is possible in 2018, but not guaranteed.
  • Regulations are the one area in which there is significant government movement. Generally viewed as a net positive for businesses and the overall economic growth potential.

The Path Forward

Washington has the ability to suck all of the available oxygen and direct all attention on a small sliver of actual activity. The last year has only seen a compounding of that natural tendency. If we can get only a modest reduction in the attention on Washington, there is plenty of positive news out there that indicates this economic recovery, while reaching historic lengths, still has some room to breathe.

This post first appeared on Trans4Cast.com

Category: The State of the Economy Trans4Cast Tags:

About Jonathan Starks

Jonathan has spent his entire career in the freight transportation sector having joined FTR in 2001. His expertise includes freight modeling, modal analysis, fleet characteristics, and equipment demand. He is directly responsible for producing FTR's more than 13 million datapoints and 85,000 forecasted dataseries each and every month.