Thursday, March 24, 2016

On the Fast Track?

Surprise, surprise: A few recent economic indicators suggest that the US economy could be turning red hot. That would be a very big surprise indeed given all the recession fears at the year’s start. Consider the following:

(1) Record tonnage. February was an awesome month for truck tonnage. The American Truck Associations’ measure soared 7.2% m/m and 8.6% y/y. The index, which is a good indicator of the broader economy since trucks account for 69% of tonnage carried by all carriers, jumped to a new record high.

However, ATA’s Chief Economist Bob Costello cautioned: “The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February.” The result was a big seasonally adjusted gain. Costello also cited inventory overhangs as a reason he’s waiting to see March’s data before getting too excited.

There is a good correlation between the trucking index and real business inventories, which may be somewhat bloated as Costello notes. However, even if there is some payback in March, the uptrend in the trucking business may boost sales of medium-weight and heavy-weight trucks, which have been stalled at a cyclical high over the past year. (See our Truck Tonnage Index.)

(2) Coast to coast. What are trucks hauling? Imports have surged recently at the West Coast ports. Inbound traffic of 20-foot equivalent containers made a good showing during February, jumping 8.6% y/y based on its 12-month moving sum. Of course, a year ago imports were depressed by strikes at the ports. (See our West Coast Ports Container Traffic.)

(3) Regional factory boom. Manufacturing business survey results came in strong for three of the earliest reporting Fed districts: New York, Philadelphia, and Richmond. The average of their composite manufacturing indexes shot straight up from -7.8 in February to 11.7 this month, the highest since November 2014. Of the contributing components, new orders and shipments rose sharply, while employment readings were steady to slightly positive.

No comments: