As you’re reading this, one of first and most closely watched indicators of the overall economic performance of the American economy has been issued. And while it’s the first major reading of how conditions are shaping up for 2017, you are best advised not to read too much into the figures, be it good or bad.
The federal government’s reading of the gross domestic product, a measure of the country’s total output of goods and services, had yet to be released at press time, but many analysts were expecting it to reflect an expansion of just a 1% to 2% annual rate. That’s compared to a 2.1% rate in the final quarter of last year and 3.5% in the third quarter of 2016. In other words, the consensus is a less than stellar first quarter performance.
However, the first quarter can be a bit “quirky,” says Bob Dieli, chief economist at the commercial trucking market research firm MacKay & Company.
“Weather has increasingly become a factor in [the] first quarter,” he told HDT in an interview. Remember the Polar Vortex in early 2014? The extremely cold weather in much of the country killed GDP for the quarter. And while not as bad, the U.S. did get hit with some powerful weather last month.
“I would not put a whole lot of trust in the first [GDP] number for the first quarter,” Dieli said. Each quarterly GDP performance can be revised two times with more complete data, including foreign trade. And it’s these foreign trade numbers than can play hell with trying to make sense out of the GDP when it comes to trucking.
As Uncle Sam counts it, when goods are imported, they count as a negative to the GDP. In contrast, export goods, because they are made in the U.S., are considered a positive. Problem is, the U.S. consistently has more exports than imports, which can weigh down the GDP to one extent or another.
That’s one reason MacKay & Company developed its proprietary measure, Truckable Economic Activity, reflecting the portion of the GDP that spends its time in trucks. This measure, unlike the GDP, counts half of imports as positive. “We think that an import generates fewer truck moves than a good that has been on our shores the whole time,” Dieli explained — but it’s still considered a positive, unlike how it’s reflected in the GDP.
At the end of May, MacKay & Company will release its first quarter Truckable Economic Activity, which relies not only on the government’s initial first quarter GDP performance, but also on the revised and more complete second one of those three reports.
Also unlike the GDP report, the TEA report measures economic activity, not from quarter to quarter, but rather year-over-year, meaning the first quarter of 2017 is compared to the same time in 2016.
Such a different comparison, Dieli said, is done “because of questions of volatility” about quarter-to-quarter GDP numbers, and it’s easier to explain how the economy is doing.
The most recent TEA report showed the nation’s “truckable economy” expanded at a rate of 2.9% in the fourth quarter of 2016 compared to a year earlier, while federal GDP numbers showed just a 2.1% annual increase – a fairly significant difference.
That’s also because TEA measures only goods – not good and services, like the GDP reports. The service sectors of housing and medical care make up the largest two GDP components, Dieli said – but they don’t travel by truck.
So, as you’re reading about the first report on GDP performance this month, or anytime in the future for that matter, keep in mind while it’s important, it doesn’t necessarily tell you everything you need to know when it comes to the trucking part of the economy.