Is the Transport Industry Driving the Economy to Recovery?

Posted : 04/8/13 8:02 AM

Ever since the last spike was driven into the tracks of the first American transcontinental railway in 1869, the growth of the US economy has been tied to freight transport. The recent development of the intermodal capabilities and the general renovation of America’s rail networks have had a similar rejuvenating influence of the country’s economy. Many analysts have pointed to recent growth in the transport industry as an indicator of a rapidly recovering economy, and with the expected increase in business in the eastern states due to the completion of the Panama Canal in 2015, the future of the economy continues to look very good in the longer term as well. Transport is the fourth largest contributor to the economy behind housing, health care, and food, and it is a major contributor to the employment market with its fiscal influence extending indirectly to all parts of the economy as a whole. The improved efficiency of freight handling that the renovated intermodal networks will bring will keep transport costs down and further encourage growth in employment. This, in turn, is expected to fuel growth in consumer goods that will further increase the demand for transportation services1. Some estimates are projecting that the volume of freight in America may double or even triple their 1998 volumes by the end of this decade. The early indicators of a transport-led economic recovery are thought to be the strong performance of the share price of some of the largest transport companies like J. B. Hunt (JBHT). Shipping giants United Parcel Service (UPS) and FedEx have also been experiencing a boom in revenues due largely to the decline of the US Postal Service. At the same time, the increased demand for goods has fuelled steady growth in small shipping that itself generates more demand for intermodal freight services to meet that demand. Shares in rail transport companies have also begun 2013 on a high with solid rises in stock value for many on the back of better than expected earnings in Q4 of 20122. Another significant factor in the transport-led economic growth in recent years has been the Federal Government’s investment in developing the intermodal network3. The positive impact of this stimulus is twofold, with an immediate effect on regional employment and a continued contribution to economic growth due to increased freight handling capabilities. This all indicates that the transport industry is one of the driving forces in the return to economic prosperity that is beginning now. References: 1. 2. 3.