November 14, 2018

Economic outlook calls for risk

Economic outlook calls for risk

Tariffs, labor costs and freight market volatility are key challenges heading into 2019, economist Jason Schenker tells transportation conference attendees.

By Victoria Kickham

The economic outlook for 2019 remains positive, but transportation and logistics professionals should prepare to manage some growing supply chain risks in the year ahead, economist Jason Schenker told attendees at a transportation industry technology conference in Dallas this week.

Schenker predicted moderating economic growth ahead, pointing to continued strength in U.S. and European manufacturing markets coupled with a slowing manufacturing economy in China. Here at home, logistics and transportation providers should keep a close watch on tariffs, labor-related issues and freight market volatility, among other challenges, he said in a keynote presentation at MarketWaves18, hosted by logistics data and analytics provider FreightWaves. Schenker is president and chief economist of financial market research firm Prestige Economics.

The ongoing trade war between the United States and China poses one of the greatest risks to the economy, and Schenker said the situation "may not unwind very quickly" in 2019. Conditions are likely to fuel freight market volatility heading into the New Year, he added, especially as companies increase imports ahead of tariffs on Chinese goods set to take effect in January, raising the risk of a drop-off in imports in the first quarter.

Schenker pointed to U.S. monetary policy as another risk ahead, noting that he expects the Federal Reserve to raise rates twice over the next six months, potentially in December and then again during the first quarter. He added that the tight labor market will continue in 2019, putting pressure on labor costs.

Although the challenges ahead indicate slowing conditions in certain sectors, including automotive, construction, metals and mining, Schenker said he expects consumer markets, e-commerce, non-durable goods and industrial technology sectors to continue to perform well in the New Year.

Other recent economic data reinforce Schenker's findings. The Conference Board's latest Global Economic Outlook, released November 13, predicts 3.1 percent economic growth next year, down from 3.2 percent in 2018. U.S. economic expansion will likely peak in the next few months, the study authors said, as the effects of tax cuts and fiscal spending wane during the course of 2019.

"The global economy will remain strong through the next half year—with no signs of a downturn—assuming there are no major policy disruptions such as a widespread escalation in tariffs on trade," Bart van Ark, executive vice president and chief economist at The Conference Board said in a statement announcing the findings. "But business cycles are maturing in most economies and growth rates are gradually reverting to slower trends in the medium-term. Looking beyond 2019, the main concerns are slower growth of labor supply and modest projections of productivity growth."

About the Author

Victoria Kickham
Senior Editor
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.

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