Bob CostelloBob CostelloChief Economist & Vice President

i ki i iAmerican Trucking Associations

December 6, 2012

U.S. Economic SummaryU.S. Economic Summary• This was a good election to win.• Uncertainty will keep a lid on growth through 

Fiscal Cliffy p g g

at least the first half of 2013, but a stronger recovery is waiting to be unleashed in 2014 & 2015

Eurozone Problems

U.S. Elections 2015• However, there are risks, including external –deeper Eurozone recession and/or hard l di i Chi d d i lki ff

Unemployment

landing in China – and domestic – walking off the fiscal cliff.• Already, some U.S. fundamentals look better 

Housing

Monetary Policy

in 2012, including housing & autos – traditional leaders in a recovery.• Truck volumes have slowed significantly dueTruck volumes have slowed significantly due to Sandy and lower factory output.

Housing Is Turning the CornerHousing Is Turning the Corner

60%2.8

Millions of Starts(Single & Multi‐family) Year‐over‐Year 

Percent Change(Speed)

2012 2013

Housing 770 000 980 000

20%

40%2.3 

2.8  ( p )Housing Starts

770,000(+26%)

980,000(+27%)

0%

1 3

1.8 

‐40%

‐20%

0.8 

1.3 

Level (Direction)

‐60%0.3 2005 2006 2007 2008 2009 2010 2011 2012

Sources: Census Bureau & ATA

New Light Vehicle SalesNew Light Vehicle Sales

20%

30%20Millions of Vehicles(Seasonally Adjusted 

Year‐over‐Year Percent Change

Millions

0%

10%

20%

15Annualized Rates)

‐20%

‐10%10

2012 2013

‐40%

‐30%52012 2013

New  Vehicle Sales

14.4 Million(+13%)

15.1Million(+5%)

‐50%02005 2006 2007 2008 2009 2010 2011 2012

Sources: Bureau of Economic Analysis & ATA

Consumer Spending on GoodsConsumer Spending on Goods

8%10%

$3,900$4,000

Year‐over‐Year Percent Change

Billions 2012 2013

Goods Spending(Current $)

+4.2% +4%

2%4%6%

$3 600$3,700$3,800

‐4%‐2%0%

$$3,400$3,500$3,600

‐10%‐8%‐6%

$3,100$3,200$3,300

Goods Consumer Spending (Seasonally Adjusted Annualized Rates)

‐12%$3,0002005 2006 2007 2008 2009 2010 2011 2012

Sources: Department of Commerce & ATA

Manufacturing Output is Slowing QuicklyManufacturing Output is Slowing Quickly

15%100110 

2007 = 100

Level of Production (Direction)

While there are near‐term constraints on U.S. manufacturing, the longer‐run outlook is very promising

5%

10%

80 90 

100  Level of Production (Direction)promising.

‐5%

0%

50 60 70 

2012 2013

‐15%

‐10%

20 30 40 

Year‐over‐Year Percent Change

2012 2013

FactoryOutput +4.4% +2.1%

‐20%

‐15%

0 10 

2005 2006 2007 2008 2009 2010 2011 2012

Percent Change(Speed)

Sources: Federal Reserve & ATA

Factory Orders (x aircraft) Say Production Will Factory Orders (x aircraft) Say Production Will Slow Significantly Next YearSlow Significantly Next Year

30%$500,000

Slow Significantly Next YearSlow Significantly Next YearMillions $

10%

20%

$450,000

Level of Orders

‐10%

0%$400,000

‐30%

‐20%$350,000Year‐over‐Year P t Ch

‐40%

‐30%

$300,0002005 2006 2007 2008 2009 2010 2011 2012

Percent Change

Sources: Census Bureau & ATA

Inventories Are A NearInventories Are A Near‐‐Term Concern For Term Concern For TruckingTrucking

1.7

TruckingTruckingInventory‐to‐Sales

Ratio

T t l l h i i l d f t i h l l d t il

1.6

Total supply chain includes: manufacturing, wholesale, and retail

1 4

1.5

Retailers Only

1.3

1.4

1.22005 2006 2007 2008 2009 2010 2011 2012

Total Supply Chain

Sources: Census Bureau & ATA

The Schizophrenic Job MarketThe Schizophrenic Job Market

400

600

12%

13% Change in Employment(Thousands)

2012 2013

Jobs +1.4% +1.5%

Rate 8 1% 7 7%

0

200

400

10%

11%

( )Rate 8.1% 7.7%

‐400

‐200

7%

8%

9%

Unemployment Rate

‐800

‐600

5%

6%

7%

‐10004%2005 2006 2007 2008 2009 2010 2011 2012

Sources: Department of Labor & ATA

(quarterly annualized rate percent change 2005 dollars)Real Gross Domestic Real Gross Domestic ProductProduct

6%

(quarterly, annualized rate percent change, 2005 dollars)

2010 – Q4 2013

• Forecast assumes we do not walk off the fiscal cliff but long term fix is pushed back

4%

fiscal cliff, but long‐term fix is pushed back until mid‐2013.• Q4 ‘12 is about 0.3% lower due to Sandy• Q1 ‘13 is about 0.4% higher due to Sandy

2%

0%0%2010 2011 2012 2013

Sources: BEA and ATA

The Fiscal Cliff is Already Lowering OutputThe Fiscal Cliff is Already Lowering Output

30%35%

Year‐over‐Year Percent Change

Factory Orders for Non‐Defense Capital Goods excluding Aircraft

10%15%20%25%30% Factory Orders for Non Defense Capital Goods excluding Aircraft

‐10%‐5%0%5%10%

‐30%‐25%‐20%‐15%10%

‐35%30%

2005 2006 2007 2008 2009 2010 2011 2012

Sources: Census Bureau & ATA

Distribution of Tonnage by Mode: Distribution of Tonnage by Mode: 20112011

Rail Intermodal1.3%

Air0.1%

g yg y

Pipeline10.6%

Water6.6%

Rail Carload

Truck 67.0%

14.4%

Source: U.S. Freight Transportation Forecast to 2023

ForFor‐‐Hire Truck TonnageHire Truck Tonnage2000 = 100 Year‐over‐Year 

Percent Change(Speed)

2012 2013

Tonnage 2.9% 2.0%15%125.0 

5%

10%120.0 

Level (Direction)

0%

5%

110.0 

115.0 

Level (Direction)

‐10%

‐5%

105.0 

‐15%100.0 

2007 2008 2009 2010 2011 2012

Sources: Census Bureau & ATA

Truckload Volume TrendsTruckload Volume TrendsOct 2011 = 100

Seasonally Adjusted

08110 

TankFlatbed

104 106 108 

98 100 102 

Dry VanTemp 

Controlled

9294 96 

90 92 

Oct Nov Dec 2012 Feb Mar Apr May Jun Jul Aug Sep Oct

Source: ATA

Capacity Changes Through October 2012Capacity Changes Through October 2012(Percent Change in the Number of Tractors Operated)(Percent Change in the Number of Tractors Operated)( g p )( g p )

0%

2%

‐2%

‐6%

‐4%

From Dec 2011

‐8%

From Dec 2011From Dec 2007

‐10%

Large TLs Small TLs

Source: ATA

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