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Waning US Transport Industry Depicts Economic Downturn
Waning US Transport Industry Depicts Economic Downturn

Waning US Transport Industry Depicts Economic Downturn

Waning US Transport Industry Depicts Economic Downturn

If the transportation industry is any indicator—and it usually is—then the US economy could be on the brink of a downturn.

When the economy is on the decline, the transportation sector is one of the first things to go. According to a report by the US Bureau of Transportation Statistics, shifts in its index that tracks train, truck, boat and plane activity occur before changes in economic growth, leading the wider economy by about four months, CNBC reported.

The index has taken a negative turn starting in late 2015 and into the summer of 2016, according to CNBC calculations. While true turning points are usually identified after the fact, the recent downward momentum could signal a similar movement in the economy as a whole.

The freight transportation services index combines monthly truck tonnage, air revenue from freight and mail, weekly rail carloads, rail ton-miles, tons moved by water and pipeline transportation into a single indicator. A similar passenger index measures passenger miles and trips by plane, train and public transportation. Both measures have been found to change ahead of the wider economy.

“A very large portion of freight volume consists of raw materials and other intermediate goods, which may be ordered in anticipation of growing activity in the manufacturing sector,” BTS analysts wrote in their last historical review of the data.

Conversely, as downstream demand begins to falter, freight shipments also decline. While passenger travel is a consumer service and may be expected to lag or change with the economy, personal and business travel also seem to respond to economic confidence and sometimes lead other indicators.

By combining multiple types of weighted transportation data in the two indexes, the TSI captures overall economic changes rather than simple shifts in market conditions between the various transportation providers (such as a change from using trains to using trucks, for example).

A look at the recent shift in each component suggests that intermodal rail traffic—goods that are moved by multiple modes of transportation—as well as air transportation of freight and mail, and pipeline transportation are influencing the freight index.

The BTS encourages analysts to use the TSI indexes they provide in economic models, but does not itself forecast the expected states of the economy, said Dave Smallen, a BTS spokesperson.

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