Man, we have been on a mad Trade Association jag the past few days.
The latest (via the WSJ’s Market Beat) is the American Trucking Associations’ for-hire Truck Tonnage Index. Most of the goods moved across the country are hauled by Trucks: 10.7 billion tons of freight
in 2005 (about ~70% by tonnage), with Motor carriers collecting $623 billion dollars — 84.3% — of all transport revenues. To say Trucking is important may be a bit of an understatement.
Here’s an excerpt from their release:
"The American Trucking Associations’ advanced seasonally adjusted
for-hire Truck Tonnage Index dropped 1.8 percent in October after
increasing 1.6 percent in September.On a seasonally adjusted
basis, the tonnage index fell to 110.8 (2000=100) from 112.9 in
September. The latest reduction put the index at its lowest level since
the end of the 2006 first quarter. The index decreased 4.0 percent
compared with a year earlier, marking the largest year-over-year
decrease since February 2001. Year-to-date, the truck tonnage index was
down 2.1 percent, compared with the same period in 2005. The not
seasonally adjusted index increased 4.7 percent from September to
117.7."
Source: ATA
I do not follow this stat on a regular basis. For some context, let’s go to a 3rd party for some context as to what the freight slowdown in October may mean:
"The news prompted David
Rosenberg, chief North American economist at Merrill Lynch, to note
that it “is extremely rare to have truck tonnage go down in October
ahead of the holiday shopping season — declines of the likes we saw
last month took place in 1981, 1982, 2001 and 2002, and these proved to
be disappointing sales periods.”“Truck tonnage for October just came out and looked borderline recessionary, for lack of a more polite term. It was down 4% y/y in
the largest decline since February 2001 (-1.8% m/m, and down now in two
of the past three months) – and now down for 10 months in a row y/y
(!). You have to – again – go back to the March/00 to Feb/01 period to
find the last time year-on-year comparables were in the red for such a
long stretch of time (and guess what happened in March/01?).”
How much of a leading indicator of future economic activity are trucking volumes? Have a look at the chart above. The slow down in the beginning of the year was very likely related to the decline in Housing and Construction. It fairly accurately foretold the dramatic decrease in Home Building. And, it makes sense that when we see weak October shipping volumes — during the pre-holiday inventory build up — it may bode poorly for the Christmas shopping season.
The overall trend in this indicator is not particularly encouraging for near term economic growth . . .
Sources:
ATA Truck Tonnage Index Fell 1.8 percent in October
Tiffany Wlazlowski
American Trucking Associations, Monday, Nov. 27, 2006
http://www.truckline.com/NR/exeres/
8D9436E1-98EF-4707-A76F-BA66BDB02F5B.htm
Truckin’, Like the Doo-Dah Man
David Gaffen
WSJ MarketBeat, November 28, 2006, 11:28 am
http://blogs.wsj.com/marketbeat/2006/11/28/truckin-like-the-doo-dah-man/
How does the ATA calculate their tonnage index? It surveys its membership on actual shipping tonnage, releases a preliminary figure (subject to change), A final report is then issued around the tenth day of the month, including month-to-month, and year-over-year results. Historical data goes back to the 1970s.
A whackage on tonnage? Ohhh what carnage! Makes me feel myage….
thanks Barry.
Barry,
I used to work for a site location company. If you want to know what is going to happen to the economy a year out, ask the site liocation folks. When factories or distribution center site locating goes in the crapper, you can bet so will go the economy.
Need to look at the railroads too for a comprehensive view:
http://www.aar.org/Index.asp?NCID=3882
How is the ATA index calculated? is it really tons, as its name implies, or is it ton-miles?
It seems like this market enjoys ignoring everything recession related.
Perhaps mutual/hedge fund anxiety trumps anything and everything.
The market is giving no indication of letting back. Today’s bounce was right on cue from oversold.
Since July, we have always had this strong bounce from oversold…then shorts build…goldilocks and rate cut talks get louder…and the market eventually hits new highs.
We have to break yesterdays lows SPX 1378 to signal any true trend change.
What david said. The railroads are hiring, in part to replace retiring workers but also because they have been pulling more freight; some of this freight appears to be a shift from trucking.
Another interesting coincident indicator was posted at Bill Cara’s site yesterday at http://tinyurl.com/y8yjbw : Willingness of senior loan officers to make loans charted along with yield curve; in a nutshell, down.
My quick and dirty GDP analysis:
Residential investment: -18%
Non-Res investment: +10%
Durables: +6%
Now, from what I understand, Non-res investment lags res investment, and everyone saw the stellar durables number from Tuesday. I don’t know that this data coupled with the new home sales data (WOW! last month was revised down! I can’t believe it) should necessarily lead to a Dow up 70. Believe what you will.
all this anecdotal evidence is just that. the big picture is not the big picture when all the skew is that the economy is about to go into the hopper when in fact its running on all cylinders because of the global economy…think asia. it little cares that some slub in northern NJ overpaid for a wood, paper and stucco house from Toll Bros. with an adjustable mort. In china they never heard of Toll. The “bigger” picture is that the global economy is humming along and this is why the market is up 15% from the summer. one year from now trucking tonnage may be up, down or static and same with housing but it wont matter that much. its all just anecdotal… the market is not going to crash, unlikely probability although anything can happen. But htat is now way to invest. It wont go down until it makes new highs and all the shorts have capitulated and not until then.
hs: Gee. Thanks. Instead of anecdotal evidence, you provide….well, nothing.
Oh, that’s not true. The global economy is “humming.” We’re “running on all cylinders.”
Yippee. Thanks for that solid analysis. I can definitely take that to the bank.
metroplexual: I’m curious. What’s the full definition of site location. Or the activities and obligations associated with it?
The reason I ask: I can see a company continuing to investigate expansion options well into an economic slowdown, because site location is somewhat strategic, and as long as the actual expansion is put on hold, the steps necessary to start the expansion, if not too costly, might continue long after the economy has slowed.
even though a lot of the reports are negative price / markets still trend up. until they don’t. i just watch price.
long and strong markets. the markets can’t even put in 2 down days … thats a huge clue.
“It seems like this market enjoys ignoring everything recession related.
Perhaps mutual/hedge fund anxiety trumps anything and everything.
”
Yes Michael C that is why it is good to read nothing and just trade price action. Nothing makes any sense if you read the reports, they will just make one emotional. Trading with emotion or personal opinion is bad.
>>>It wont go down until it makes new highs and all the shorts have capitulated and not until then.<<< LLOYD: Come on, give it to me straight. I drove a long way to see you, the least you can do is level with me. What are my chances?
MARY: Not good.
LLOYD: You mean not good, like one out of a hundred?
MARY: I’d say more like one out of a million.
LLOYD: So you’re telling me there’s a chance?
— dumb & dumber (1994)
adding to the comment about Q3 GDP. most of the 60 bps upwards revision appears to be less drag from trade deficit (37 bps) and a buildup in inventories (16+ bps). why that has the market going wild, i don’t know.
Taking the durables/non-defense capital goods nums from yesterday, the increased inventories from today, the continuing housing “softness” and only decent consumer spending, I’m thinking 0-1% GDP in Q4
David’s comment is the right place to follow up – by looking at overall transportation. With fuel price increases this year, railways became preferable. So the question is how much of the trucker’s decline is related to switching to railways and how much is an economic slowdown?
hs is right:
The US economy is being bouyed by the global economy.
Disposable personal income:9,588.4
Less: Personal outlays: 9,709.7
Equals: Personal saving: -121.3
Personal saving as a percentage of personal income -1.3
That’s a huge chunk of 2.2% especially when that growth is driven by consumer spending. Add in the collapsing dollar, trade and budget deficits, and understated inflation you can see a national economy on life support from abroad.
He is also right that investors need to think globally. Isn’t it the case that 75% of DJIA revenue comes from abroad? America can stagflate and even decline and it is possible for the rest of the world to deliver increased profit growth.
I hope hs is still reading this site even though he has problems with some of the analysis, and I hope he can comment on the potential impacts of a changing political climate on the economy. My own point of view is that a lot of this “growth” is sequestered in the investor class, and the vast majority feels the economy is not growing. If that doesn’t change, policies will have to change, likely not for the better: remember Smoot-Hawley.
TR elios:
exactly my point, there is nothing to analyze as the dow is up another 100 points. and i want to thank you for being short . you are smarter than you think you are. You can analyze all you want but you cant draw any conclusions other than its anecdotal. follow the trend until it stops trending. then follow that trend until its stops trending. believe it and you will do it.
A big reason why the market is going up is that income growth and unit labour costs were revised down preerty significantly. Lower unit labour costs mean higher profit margins (and the corporate profits as a % of GDP for Q3 reached a new high), and make Fed policy more likely to respond to continued economic weakness.
These sell-side trolls certainly are helpful. Along with anti-anecdotal excoriation we get the trivially obvious such as the global economy is ‘humming’ (until the US consumer can’t afford to buy their goods presumably) along with real gems of market wisdom such as, “[the market] wont (sic) go down until it makes new highs and all the shorts have capitulated and not until then.”
Here’s what Laszlo Birinyi says about the latter (http://tinyurl.com/w88ss) based on his firm’s (non-anecdotal) research:
“It is extraordinary how little we know about the market’s history. One sterling example was the view in 2003 that we would not have a bottom until there was capitulation. While that was an articulate idea, in fact it seldom happens. In August 1982, a week after the market bottom, the NY Times wrote an in-depth story arguing that we need to see a sell-off, a capitulation, and so forth before we could go forward. But we had bottomed 5 days prior.”
But the bit of Dumb & Dumber dialogue above was an even better rejoinder actually.
Now I have to go out and do some selling into this lovely oversold bounce: the trend is indeed our friend and as long as foreign investment flow into our markets continues at current levels (e.g., http://tinyurl.com/722dz) there will be some price support following downturns, at least until our markets become insufficiently profitable and there isn’t (duh!).
We drove to Tucson for Thanksgiving, and saw very few trucks on the road at all. Also watching the trains go by is scary – they come in from the west fully loaded with China Shipping piggybacks, and go back west almost completely empty – saw one train that was just completely empty cars.
We are toast on trade deficit this quarter….
The reason the merket is going up is that A lot of policy makers came out this week to assure Yen Carry Traders that inflation is still a threat and the Fed is willing to raise rates if need be. That is regardless of whether they do raise rates or now. Probability of a rate pause is shrinking.
So if I sell Yen right now at a .25% rate in picking up US Dollars to buy US treasuries I’m making a decent 4.5% for nothing. If I take on some heavy leverage I can make that 4.5%… 45% I then borrow big to sell those Yen and then take the profits from the trade and buy what ever I want. A new Aston Martin, A Playstation 3 on eBay, or maybe an ETF that tracks the S&P or NAS100.
As long as the spread between the BOJ and Fed Rates stays wide I’m making Bank with a capital “B”.
I mean think about it guys. BOJ coems out after a year of Japanese economic recovery and comments baout a slowing economy after the Dollar powerslides against the Yen and then the Fed who is worried about a slowing economy (only 2 of which were decenters worrying about rampant inflation) now are all for containing rampant inflaition. With Bernanke jumping the line now.
We are in a “measured pace” of easing carry traders out of their positions.
BR-
Transportation doing poorly? That indicators augurs well for increased M&A activity in the trucking industry. In the current good is bad, bad is good bull stock market, expect DJ Transportation index to skyrocket.
I have been at a transportation conference and today a guy gets up with a chart showing the number of available loads from the DAT board and they plummeted in October. Down something like 64%. DAT is a place on the web to put loads of shipment in search of trucks.
I wonder if anyone will read this since it’s a couple days after the article was posted.
I have been hearing complaints from drivers throughout this fall about slow freight.
http://www.pumpkindriver.com/cgi-bin/ultimatebb.cgi?ubb=get_topic;f=3;t=007408
I don’t know if rail traffic explains the drop. Most of the traffic that could move to rail moved well before October (these are month to month not year to year comparisons if I understand correctly). Also intermodal has been near capacity for some time now. Plus diesel is steady or slightly moving down (which usually moves freight from the rails to the roads),
Are We In A Recession Already?
It’s been a rough few months for economic indicators. There have been recent low readings from productivity, durable goods, GDP, ISM, and of course, housing. First, productivity – nonfarm output per hour – took a hit last quarter. It was