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UPS: THE RECOVERY IS REAL, BUT VULNERABLE

Bullish comments out of UPS this morning.  Although we’ve been seeing some very weak data out (and commentary) of the transport sector, UPS is bucking the trend.   They think the recovery is real and could continue throughout 2010 as volumes surge. At a meeting in Singapore UPS CEO Scott Davis made the following comments:

“I think we will go back to see positive volumes next year as the economy improves…I believe the recovery is real, but it is gradual. It is sustainable but vulnerable.”

He is equally optimistic with regards to the holiday season, which could be a continuation in the recent uptrend in consumer spending:

“We talked to our customers in recent months, mainly our retail and technology customers, and many of them are quite bullish on this Christmas season while others are pretty cautious.  Most people, the consensus, are saying it is going to be a pretty flat holiday in the U.S. I think it will be slightly better than that,”

Of course, this is in stark contrast to recent comments from YRCW CEO Bill Zollars who sees no pick-up in economic activity in the coming 12 months.

“The operating environment remains very challenging as we continue to face a difficult economy that appears to have stabilized, but is not showing any signs of sustained positive momentum.  We remain cautiously optimistic that the economy has bottomed out, but it remains too early to know for sure.  We’re not anticipating any growth in the economy for the remainder of this year and at least for the first half of next year.”

Recent rail traffic and steel imports would seem to confirm the Zollar’s comments, but this is certainly the UPS comments are certainly a positive sign for the bulls.  My contention, however, is that we’re seeing much the same activity from UPS as we’re seeing across the entire economic spectrum.  Asia is quite robust while the domestic markets remain weak.

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