The January 2006 economic outlook indicates strong economic factors that are likely to cause growth in the transportation sector, according to information published by FTR Associates of Nashville IN.
"The combination of a healthy labor market, solid business investment and a broad based global economy, still translates into a positive outlook for 2006," said Eric Starks, FTR Associates president. "There are, of course risks. The economy will become more vulnerable towards the end of the year, as housing and the consumer sector downshift, and the economy has to fill the void left by these sectors to keep expanding.
"Also, energy prices will remain an ongoing economic threat. With no excess capacity to produce energy, any supply disruption, real or imagined, will send prices soaring. Still, the expansion’s fundamentals look solid, and we expect to overcome any obstacles we run into in 2006.”
The preliminary estimate of real gross domestic product (GDP) in the fourth quarter came in at a disappointing annualized rate of 1.1 percent and raised some worries about the future of the economy.
Despite the weak finish to 2005, the prospects for 2006 still look solid, FTR predicts.
The group said it expects business investment in equipment and software will be a prime driver of the economy in 2006, but will brake from 2005’s active pace.
Higher interest rates will translate into a slowdown in certain key sectors of the economy. This change will weaken some of the fundamentals that drive business investment.
Business investment in equipment and software will rise only 8 percent in 2006, compared to an over 11 percent increase in 2005.
In addition, higher interest rates and still high energy costs will have a negative impact on the consumer sector.
Consumer spending is projected to post only a 2.6 percent rise in 2006, down a full percentage point from 2005.
Despite a slowdown in certain sectors, the prospects for 2006 still look optimistic for both the macro-economy and the freight environment.