What does transportation data tell us about the economy?

There is a wide variety of economic data provided by the government that attempt to give us information about the health of the economy. Yet there’s a great deal of cynicism around this data in the financial media, and analysts strive to make distinctions between the real economy and the stock market. Kyle Jones, Financial Planner at Wamhoff Financial Planning & Accounting Services, provides indicators that may help uncover the real health of the US economy.

The Dow Jones Transportation Index
  • The Dow Jones Transportation Index (DJTA)is the oldest stock index in use, and is the most widely recognized gauge of the country’s transportation sector.
  • In times of real economic growth, transportation data would show an increase.
  • Currently, the DJTA is showing conflicting evidence.
  • While the overall index is showing a year-to-date return of 8%, freight traffic did not show any sign of growth year-to-date through the week ending April 16, 2016.
  • In fact, carloads were down 12.9% compared to the same week in 2015
  • For the first 15 weeks of 2016, US railroads reported cumulative volume of over 3,600,000 carloads, which is down 14.10% when compared to the same timeframe last year.
If the data excluded railroads, would the economic data improve?
  • Unfortunately, no.
  • According to the Royal Bank of Canada, a recent note to investors states that no “green shoots” during the quarter from a freight or pricing standpoint.
  • Also, transportation firms controlled costs by reducing their employee numbers and generally speaking, this is a sign that the freight environment is not robust.
  • RBC adds that until the trend reverses, and transportation carriers start hiring, the freight environment will continue to be sluggish.
What does this mean for the overall economy?
  • Many are asking whether it is possible to have an expanding, growth-oriented economy with declining transportation data.
  • Even with improvements, the transportation environment would still be classified as “sluggish”

Sources:
https://finance.yahoo.com/q/hp?s=^DJT&a=11&b=31&c=2015&d=03&e=22&f=2016&g=d
http://www.railwayage.com/index.php/freight/class-i/down-down-goes-the-freight-traffic.html?channel=50
http://www.zerohedge.com/news/2016-04-25/bad-news-trannies-these-headcount-numbers-arent-encouraging