By: Stash Graham
When looking for leading indicators of industrial production, or general economic activity, the Cass Freight Index Report provides a detailed look at one of the most important components from economic activity, the movement of tangible goods. We, at GCWM, believe that following transportation and logistics data is paramount to project economic activity in the near to intermediate term. For example, it is difficult for an automotive manufacturer in Tennessee to produce a finished car if the plant is not receiving automotive freight shipments providing them the parts to build the car. While Cass Information Systems has global capabilities, across both oceans, the Cass Freight Index centers around North America. We feel that is important to mention this considering the headlines of trade conflicts for the better part of the last 2 years.
2 days ago, the Cass Freight Index Report for the month of June came to my inbox, and was titled, “Has Economic Contraction Already Begun? Will GDP be Negative in Q2?”. With respect to the latter part of the title, we believe that there is enough consumer retail data this quarter to state that the 2nd quarter U.S. GDP should be positive. The title is direct and sobering enough to warrant further investigation. June, as with the previous 6 months, provided a negative year-over-year change in shipments. The trend is not getting any better either, out of these 7 consecutive months of negative prints, the percentage rates continue to get more negative. For example, February produced a -2.1% y-o-y change, while May and June has produced -6.0% and -5.3% y-o-y in shipments respectively. It should be fair to conclude that after a couple quarters of negative data points that economic activity is unlikely to be robust in the near-term future.
In summation, the Cass Freight Index follows the movement of freight/goods throughout the domestic region. Since the end of World War II, there has never been a period of economic expansion or contraction without there being an expansion or contraction in freight activity. We, undisputedly, are in a period of year-over-year growth rate freight contraction.
It should be noted the Cass Freight Index has shown periods of domestic freight market contraction before without having an economic recession, however, this report does provide an invaluable starting point in the analysis of the near and/or intermediate term economic growth or contraction of our domestic economy.
If you would like to read the Index report, please see the following link to go their website: