Tuesday, November 19, 2013

Truck tonnage and equities update

The amount of tonnage hauled by America's trucking industry fell 2.7% in October, but was up a strong 8% from October of last year (i.e., this can be a very volatile statistic and seasonal adjustments may be faulty—despite all that, the index is clearly increasing). This is one of those real-life statistics that, while it may not be perfect, measures the increasing physical size of the U.S. economy in a way that few other statistics can. The weakness in October likely had lots to do with the government shutdown that month; if so, activity should bounce back next month.

I like this chart because it ties the growth of truck tonnage hauled to the growth of the inflation-adjusted value of the stock market. Logic says that the two should be correlated, and indeed they are, over decent intervals of time. It also helps to highlight "bubbles." Note how equities way outpaced gains in the real economy in the late 1990s, and way underperformed the decline in the economy in the Great Recession. Both periods represented extremes of valuation that investors could exploit. Currently, stocks appear to be behaving more or less normally compared to gains in the economy. This dovetails nicely with the current PE of the S&P 500, which is very close to its long-term average:

UPDATE (Oct. 19, 2015): At the request of a reader, here is an updated version of the first chart in this post. Truck tonnage continues to increase—rising 3.1% in the year ending September. That suggests that the physical size of the economy is still growing, and that would in turn support an increase in the real value of equities. The peak in the real S&P 500 happened last February, and equities are down 4-5% since then.


William said...

Scott -

Thank you for the explanation and the informative chart. It is truly enlightening.

William McKibbin said...

I agree that stocks are priced for buyers these days -- the stock market is on sale -- however, insist on stocks that pay hefty dividends.

Southsider said...

Excellent post. Thank you.

Eddie Bravo said...

If these two indicators should not go out of sync for prolonged periods and their divergence relative to each other indicates a 'bubble' in one sphere of the economic universe versus another (or perhaps undervaluation relative to the other). Does this not suggest there was a 'bubble' in the real economy/trucking universe in the mid-70s, or conversely equities were very undervalued?
Amusing to think of a 'bubble in the real economy' vis-a-vis financial assets.

Coach Steve said...

how about an updated chart?

Scott Grannis said...

I've amended the post to include an updated version of the chart as requested.