Analyst: 2007 economic outlook is unclear

Factors that drive freight are presenting a mixed picture for 2007, according to Nashville, Ind.-based transportation forecasting and research firm FTR Associates. A declining housing market and automobile production cuts likely will be a drag on continued growth in other segments of the economy, the firm says.

“We think that housing will find a floor and that the economy will expand at slightly below its long-term rate of growth at about 3 percent in 2007,” says Steve Graham, vice president of market analysis for FTR. Growth will be fueled by business investment in equipment and by exports, he says. With solid balance sheets and a fairly tight labor market, companies will continue to invest in productivity-enhancing equipment. And exports will be bolstered by a weak dollar.

“The global economy is still experiencing strong broadly-based growth,” Graham says. “However, there is a significant danger that secondary effects from housing and the slowing auto sector could spill over to the wider economy. And if businesses in other industries respond to the weakening activity by curtailing their own investment and hiring plans, the economy could devolve into recession.”

FTR Associates now believes that the chances of recession, most likely in the first half of 2007, are one in three.