There are largely overlooked nuggets of information buried in the numbers about the economy and trucking that could be the most telling sign of where conditions are headed, writes Evan Lockridge in his Econ Watch column from the March issue of Heavy Duty Trucking magazine.
This graph shows the comparative performance of the Transportation Services Index (blue) and Gross Domestic Product (orange) over each quarter in the last three years.
3 min to read
This graph shows the comparative performance of the Transportation Services Index (blue) and Gross Domestic Product (orange) over each quarter in the last three years.
Every once in a while, there are largely overlooked nuggets of information buried in the numbers about the economy and trucking that could be the most telling sign of where conditions are headed. Some of those recent nuggets make it almost impossible not to reasonably hope this year will be a good one.
U.S. for-hire freight movements – including trucking, rail, inland waterways, pipelines and air freight – were up during the fourth quarter of 2016 by 2.9% from the third quarter. It’s a perfect example of how the health of trucking is tied to the overall economy.
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This increase in for-hire shipments took place as growth in the gross domestic product – the widest measure of economic activity – slowed to an annual rate of 1.9% in the fourth quarter, down from 3.5% in the third quarter, in the first of three estimates released in late January.
The fourth quarter slowdown in GDP growth was preceded by a third-quarter dip in for-hire freight movement of 1.1%. And the rapid GDP growth in the third quarter was preceded by a strong increase in freight movements in the second quarter of 2.5%.
In other words, when for-hire freight movements are good in any given quarter, like they were in the final quarter of 2016, it helps set the stage for improvements in the GDP for the following quarter, in this case, the first quarter of 2017.
When you consider the fourth-quarter increase in for-hire freight movements was the largest gain since the final quarter of 2011, that’s reason for optimism for first-quarter GDP numbers.
Going the other way, however, GDP doesn’t always tell the whole story when it comes to trucking. Take imports. The National Retail Federation projects U.S. imports will be 4.7% higher in the first half of 2017 than a year earlier. While that means more containers to be moved by truck, imports are subtracted by Uncle Sam when calculating the nation’s GDP, while exports are an addition to the formula. The slower fourth-quarter GDP growth was largely due to increased imports, while exports posted the biggest drop in about two years. That’s why MacKay & Company counts imports as positive in its proprietary measure of economic activity that moves by truck, Truckable Economic Activity. And so far, TEA looks to have gotten off to a strong start this year, according to Robert Dieli, president of economic research and management consulting firm RDLB Inc.
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Meanwhile, the NRF is forecasting retail sales, which make up a big component of the GDP, to grow between 3.7% and 4.2% this year over 2016 (minus autos, gasoline and restaurants). Online sales alone could jump as much as 12% year-over-year after posting strong numbers last year. In January, retail sales jumped again, with many analysts saying it bodes well for economic growth later in the year.
There are indications that other parts of the economy are also doing well. The nation’s manufacturing sector in January posted its best performance in around two years. Employment continues increasing, hitting what some economists even consider “full employment.”
And while it’s impossible to ignore that many trucking companies posted disappointing fourth quarter and even full-year 2016 financial results, there was still a lot of money made in trucking last year – it just wasn’t as good as 2015. Several publicly held fleets said in releasing their earnings reports that they believe things are turning for the better this year.
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