This week the first look at Q2 GDP came in and the number was 1.7%. Headlines were anywhere from "GDP Crushes Expectations" (Set the bar low) to "GDP Hardly Booming but no swoon in sight". The key factor for which headline you believe is what were your expectations to start with? Personally, I am in the camp that regardless, 1.7% is very anemic growth rate, it will not solve our unemployment problem and it will keep our economy somewhat mired for a long time.
But, what does it mean for transportation? I believe this is just another indicator to show demand is very tepid and will remain that way for some time. Revisions for GDP growth in Q1 were revised downward which means my experience meter seemed to have a better handle on GDP than the experts (I just look around and talk to people - Q1 was clearly worse than people had said). The Q1 number was revised down from 1.8% to 1.1%. Last three quarters have been less than 2% growth in each quarter.
For transportation this translates into lower demand and while there may be a little bit of capacity issues due to hours of service (HOS), demand is going down faster than capacity so net-net we are at balance or, in fact, slightly over capacity. In total we are seeing real overcapacity in intermodal as the big rush to get into that space has caused a huge container growth at the various IMCs.
The story from the transportation economists a few years ago was when you see 3% GDP growth that is when transportation rates will start going up. Of course, they have now changed that tune since 3% isn't anywhere near possible in the near future so the fear game is on hours of service.
However, my advice continues to be: Those who do not allow emotion, fear and "the government regulation boogey man" get to them will use real data to determine what is really happening. They will find capacity is there, rates are steady and in some cases going down, and for the foreseeable future that will be the story.
Keep calm and be diligent about your data analysis and you will find, while low GDP is not what we want for other reasons, this is probably a good time to be a buyer of transportation. If you stay calm while your competitors panic, you really can pick up some competitive advantage points during this period.