Freight Traffic Downward Trend Signals When Recession Began

Many economic talking heads are suggesting that the economic downturn (spelled “recession”) began at the beginning of 2008. This date is important to those who use the historical average recession span of 14.4 months to forecast when economic recovery will begin. I want to be on record that there is nothing average about what is happening, and that you should use historical data with suspicion that any conclusions drawn are erroneous.

A recession is the contraction phase of a business cycle. Having been involved with logistics most of my career and having watched the interplay between recessions and freight movement, I can tell you that the movement of goods between commodity producers, factories, and retailers is the pulse of the economy. 

Railroads are the prime movers of the commodities to the factories, and are therefore a leading indicator of recessions. The following chart illustrates the USA rail car movement counts:

The leading indicator of a recession – the rail car count – begins its negative trend in June.

Trucking serves as the prime indicator of the U.S. economic health, representing nearly 70 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. The following graph is from the American Trucking Association:

Fairly clearly, you are able to see the decline in truck freight traffic in the USA began in earnest in August. Sometime between June (rail car count decline) and August (truck tonnage decline), the recession began. This is validated by third quarter GDP results.

There is no doubt the economy was showing signs of distress in the first part of the year, but it was overall expanding within the first two quarters of 2008.

Definitely, we were not in a recession at the beginning of 2008. End of story.

Disclosure: none

Comments

[bbowen7:]

It is nice to see an assessment based on those making and moving stuff, instead of those pushing financial numbers around. The (Democratic) politicians wanted to portray it as a recession about a year before it was.

2008 Nov 03 01:22 PM