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American Trucking Associations: 'The Second Quarter Is Going To Be Terrible'

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American Trucking Associations: 'The Second Quarter Is Going To Be Terrible'

American Trucking Associations Bob Costello says the U.S. economy is going to "get ugly."

"We're in a recession. The longest economic expansion in our nation's history is over," said Costello, ATA's chief economist and senior vice president of international trade policy and cross-border operations. "The second-quarter GDP, you can expect that to decline on an annual basis up to 20% — unprecedented.

"Going back to the financial crisis for comparison purposes, the worst quarter was the fourth quarter of 2008. We saw an 8.4% reduction. So if we're pushing a 20% reduction in GDP, you know it's bad," Costello said during a Council of Supply Chain Management Professionals (CSCMP) webinar Friday.

"Uncertainty is skyrocketing. Forecasting is difficult enough to begin with, let alone when we're in unprecedented times," he said. "One thing we do know, though, is we're in a recession, the second quarter is going to be terrible."

Costello said if the coronavirus crisis wanes and "we can start to get back to some normal times in June or July, I'm hoping we can have more of a V-shaped recovery."

A V-shaped recovery would be one in which factory production, freight moves and consumer spending rebound to precoronavirus levels quickly.

In the meantime, there will be "winners and losers" during the economic crisis, Costello told webinar host Gail Rutkowski, executive director of the National Shippers Strategic Transportation Council (NASSTRAC).

"The vast majority of businesses are going to hurt and hurt badly," he continued, singling out restaurants as big losers. "The job market is deteriorating quickly. Just over 10 million people filed for unemployment in a two-week period — just nothing even close to that in history. That all is going to have a major impact on shippers."

Stay-at-home orders obviously impact shopping and consumer behavior. Costello said e-commerce of course is a winner and may remain so even after restaurants and brick-and-mortar stores reopen.

"I do think you'll probably see online [businesses] grab market share and retain a lot of it," he said. "I think supply chains are going to change from all of this."

He noted that in an economy that was in good shape prior to the coronavirus outbreak, "inventories were bloated." Now freight demand is shrinking — and makes trucking a loser.

"That means I would expect a lot of trucking failures. I hate going out and saying that, but I think you need to know that. Even with SBA loans, it's federal help, but it's not going to save the day," he said.

"Related to that, I know as shippers some of you are looking to extend payments to your vendors, including trucking companies," Costello continued. "I get it. Everybody's just trying to survive. … There are going to be a lot of fleets that end up failing if they don't get paid in time." 

The lack of demand also will force fleets to lay off drivers, Costello said, explaining that when freight returns, capacity will become an issue again.

"When you see some of these fleets go out of business — and I'm expecting a lot of them — I think things are going to get really tight — 2014 tight or even more so. That is also something shippers need to watch for," he said.

Costello said shippers and consumers should thank the truck drivers who are out on the road delivering freight rather than hunkering down with their families at home during the coronavirus crisis.

"Truck drivers are heroes on the highway right now. They are on the front line. I get it. A lot of places are nervous about coming into close contact with people, but we need to make sure that we treat drivers the way they need to be treated for doing this," he said. "We wouldn't have goods if it wasn't for them. As shippers we wouldn't have products to sell. Your supply chains would break down without the drivers. … We need to make sure that they have a place to use the bathroom."

 

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