Where Is Economy Headed in 2011?

Fleets looking for positive economic news for 2011 are instead getting mixed signals from an economy that just doesn’t seem to know where it is heading just yet.

Declining home prices, higher oil prices, and sagging consumer confidence are competing with the realities of healthy year-end retail sales and improved expectations for job creation.

The biggest U.S. economic negative is the slippage in home prices through October 2010. According to Standard & Poor’s Case-Shiller Home Price Indices, the 10-City Composite was up only 0.2% and the 20-City Composite fell 0.8% from the same month in 2009 – the fifth consecutive month where the annual growth rates moderated from their prior month’s pace.

“There is no good news in October’s report [as] home prices across the country continued to fall," noted David Blitzer, chairman of the Index Committee at Standard & Poor's.

“Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism,” he added. “On a year-over-year basis, sales are down more than 25% and the months’ supply of unsold homes is about 50% above where it was during the same months of last year, while housing starts are still hovering near 30-year lows.”

On a broader global basis, a spike in oil prices is becoming a major concern. Oil prices topped $91 per barrel this December, up from $75 in September, pushed by increased global demand and a weaker U.S. dollar. Current forecasts predict that oil prices will reach $100 per barrel early in the near year.

On top of that, the Conference Board’s Consumer Confidence Index decreased slightly in December to 52.5, down from 54.3 in November, with its Present Situation Index declining to 23.5 from 25.4 and its Expectations Index decreasing to 71.9 from 73.6 last month.

“Consumers’ assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious,” said Lynn Franco, director of the Consumer Research Center at The Conference Board. “Thus, all signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate.”

Yet there’s good news to be found as well. U.S. retail sales at year-end – excluding automobiles – rose 5.5% between Nov. 4 and Dec. 24, compared to the same period in 2009, according to MasterCard’s SpendingPulse survey, with clothing posting the biggest gain of 11.2% and electronics only 1.2%.

More optimistic hiring expectations abound in the U.S. business community as well, with U.S. employers anticipating small staffing gains for the first quarter of 2011, according to the latest Manpower Employment Outlook Survey, conducted by Manpower Inc, with hiring expectations up 9% for the first quarter of 2011, up from 5% during the fourth quarter of 2010.

“The fact that hiring expectations are trending upward is an encouraging sign,” said Jonas Prising, Manpower’s president of the Americas.

“This quarter’s survey responses paint a picture of a job market that is easing up, although not as quickly as anyone would like,” he added. “We are still stuck in first gear, but the ongoing sector-wide improvement we have seen over the last year suggests that the labor market is ready to shift to a higher gear in 2011.”

Weekly initial jobless claims also dropped below 400,000 for the first time in almost two years, according to the U.S. Dept. of Labor – dropping to 338,000 the week before the Christmas holiday.

Fleets are also finding that toll wreaked on the trucking industry by the global recession in terms of companies going out of business is offering something of a silver lining to those that weathered the downturn.

“Things have been pretty tough over the last few years,” noted Dino Pistoresi, CEO & president of Nello Pistoresi & Son, a food and grocery delivery service with 18 company trucks, 75 refrigerated and dry van trailers, and 20 owner-operators serving Washington, Oregon and Western Idaho.

“[But] business is getting better,” he told Fleet Owner. “A lot of companies have gone out of business and that has put a lot of freight out there for those of us remaining.”

“From what I see, where we are now is where we will be in 2011,” added Jimmy Ray, vp of Mesilla Valley Transportation, which specializes in time-sensitive service between major manufacturing areas in the U.S., Canada and Mexico. “Our business is more stable again; we have readjusted.”

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