Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

This Indicator Signals the US Economy Is Slowing Down

Economics / US Economy Apr 30, 2019 - 04:40 PM GMT

By: Patrick_Watson

Economics It’s not a good sign for your health if your blood pressure drops too low. Similarly, the economy is probably sick when its circulatory system slows down.

You don’t need a blood pressure gauge to know it either. Just count how many trucks you see on the highway.

Under normal conditions, busy highways and seaports mean a growing economy. Businesses are producing more stuff finding its way to consumers.

That was happening since we emerged from the Great Recession in 2009, albeit slower than in the past cycles.


This Indicator Signals the US Economy Is Slowing Down

Now with freight traffic dropping, the economy could soon get dizzy… and we’ll all feel it then.

Rush to Import

When the trade war picked up steam, something unexpected happened. Freight volumes shot up.

Anyone who was paying attention knew by mid-2018 that American buyers were going to pay more for imported goods.

US businesses responded by rushing to import as much as possible before tariffs (i.e., taxes) rose even higher. Hence the Overheated Highways I wrote about in May.

Note, this wasn’t new demand. It was the same goods in the same amounts companies would have bought later on. They just bought them sooner in order to avoid tariffs.

When businesses moved up their import purchases, it meant they would import less in the future.

Cargo Volumes Decline

Now the future is here. Warehouses are full, and cargo traffic is slowing. Here are a few telltale headlines, just from this month.

  • Truckers Cut Payrolls As Freight Demand Softens (Wall Street Journal, April 5, 2019)
  • German Exports Drop More Than Forecast (Financial Times, April 8, 2019)
  • Airports See Cargo Volumes Decline Further in February (Air Cargo News, April 9, 2019)

That last story is particularly disturbing. It shows the same pattern unfolding in Asia and Europe as well as North America.

Lower bookings have made container spot rates from Asia to North Europe drop 36% this year. Reducing mining output in Brazil is making some companies send older ships to scrapyards.

The March NFIB Small Business Optimism Index showed a drop in the number of business owners who viewed inventories as too low, as well as reduced expansion plans. That may explain some of this decline.

Then there’s the latest Producer Price Index data. Here’s the PPI sub-index of trucking costs:



Chart: St. Louis Fed

You can see trucking costs climbed like crazy from mid-2017 through the end of 2018. Now they’re reversing downward.

The last time that happened was late 2014, when oil prices crashed. The US had a kind of mini-recession over the next year.

The next time may not be so “mini.”

Economic Heartbeat

People who monitor this data closely are getting concerned. Annual growth in the widely respected Cass Freight Index, which tracks North American freight shipments, dropped in the last four consecutive months.

The editors, who weren’t too bothered by the first three declines, said this in their latest report:

As we try to navigate the ebb and flow of the economy, we don’t pretend to have any ‘secret sauce’ or incredibly complex models that have exhaustively analyzed every data point available. Instead, we place our trust in the simple notion that the movement of tangible goods is the heartbeat of the economy, and that tracking the volume and velocity of those goods has proven to be one of the most reliable methods of predicting change because of the adequate amount of forewarning that exists…

Beyond our concern that the Cass Freight Shipments Index has been negative on a YoY basis for the fourth month in a row,

• We are concerned about the severe declines in international airfreight volumes (especially in Asia) and the recent swoon in railroad volumes in auto and building materials;

• We are reassured by the sequential increase in the Cass Freight Shipments Index (up 2.0%) and the volumes in U.S. domestic trucking (especially in truckload dry van);

• We are closely watching the volumes of chemicals and other shipments via railroad, as they have lost momentum in recent weeks and may give us the first evidence of the global slowdown spreading to the U.S.

Bottom line, the data in coming weeks will indicate whether this is merely a pause in the rate of economic expansion or the beginning of an economic contraction. If a contraction occurs, then the Cass Shipments Index will have been one of the first early indicators once again.

I have said before that we’ve reached Peak Globalization and the flow of physical goods will lose importance in the future. But for now, it’s still critical. The Cass data ought to concern everyone.

If cargo movement really is the “heartbeat of the economy,” like Cass says, the economy should probably consult a cardiologist. This problem may get worse before it gets better.

The Great Reset: The Collapse of the Biggest Bubble in History

 New York Times best-seller and renowned financial expert John Mauldin predicts an unprecedented financial crisis that could trigger in the next five years. Most investors seem completely unaware of the relentless pressure that’s building right now. Learn more here.

By Patrick_Watson

© 2019 Copyright Patrick_Watson - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules