Recession Warning: Freight Volumes Negative YoY For 11th Straight Month

The Cass Freight Index once again warns of economic contraction.

Donald Broughton, founder of Broughton Capital and author the Cass Freight Index, says the index signals contraction, possibly by the end of the year.

That's just one month away.

Six Key Points

  1. With the –5.9% decline in October, following the string of declines in May through September (ranging from -3.0% to -6.0%), we repeat our message from the previous five months: the shipments index has gone from “warning of a potential slowdown” to “signaling an economic contraction.”
  2. We acknowledge that: all of these negative percentages were against tough comparisons (some extremely tough), and the Cass Shipments Index has gone negative before without being followed by a negative GDP. However, demand is weaker across almost all modes of transportation, both domestically and internationally.
  3. Several key modes, and key segments of modes, are suffering material increases in the rates of decline, signaling the contraction is getting worse**.**
  4. We know that freight flows are a leading indicator, so by definition there is a lag between what they are predicting and when the outcome is reported. Nevertheless, we see a growing risk that GDP will go negative by year’s end.
  5. The weakness in spot market pricing for many transportation services, especially trucking, along with recent airfreight and railroad volume trends, heightens our concerns about the economy. Weakness in commodity prices and the ongoing decline in interest rates have all joined the chorus of signals calling for an economic contraction.
  6. The Index on a 2-year percentage change basis went negative (-0.1%). This suggests that the great surge of 2018, or ‘Trump bump’ as it was characterized by many, has now been completely erased at least from a freight flow perspective, as measured by the volume of freight bills paid by Cass.

Storm Clouds

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