Thursday, September 26, 2019

Truck tonnage update: still looking good

I've made a series of posts on this subject over the years, and they have apparently captured the interest of many readers, so here's another installment.

Truck tonnage, which is published monthly by the American Trucking Associations, has a strong tendency to track the level of stock prices over time. That's not surprising, since the physical volume of goods carried by trucks (which represents "70.2% of the tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods," according to the ATA) should be a reasonable proxy for the overall economy, and stock prices tend to rise as the economy grows.

Last month's post showed a huge spike in July truck tonnage, but to be fair the series has been unusually volatile of late. The most recent datapoint, for August, registered a 3.2% drop from July, but it still shows a 4.1% year over year gain. Fiddling with the data, I discovered that a three-month moving average does an excellent job of smoothing out the inherent volatility of this index, and it shows the series to be in a definite uptrend. All of which suggests the equity market may be a bit too cautious about the current health of the economy.

Chart #1 

Chart #1 shows the raw data for truck tonnage (white line) and the three-month moving average of the same data (yellow line). Note how the volatility in the data almost completely disappears using a three-month moving average. That suggests there are some problems with the seasonal adjustment factors that are being used by the ATA.

Chart #2

Chart #2 compares the three-month moving average of the trucking data with the level of the S&P 500.


Grechster said...

Thanks Scott. I'm one of those who like this series.

Johnny Bee Dawg said...

Thanks for that update.

Every day, the TV has a constant parade of negative nancies talking about doom in the economy. Here comes the recession!!!
That Morgan Creek guy today was insufferable. "Market is 91% overvalued". It was 40% overvalued earlier, according to him, and now its up another 20%.

Yet much of that pesky data just shows an economy & consumer that are grinding along higher and higher.

Media, Fed, DEMs, Deep State all doing their best to keep a lid on things.
In Peach 45!!!

Yet the S&P Low Vol index (SPLV) just hit another all time record fresh new HIGH again today. Up 26% YTD total return.
Beautiful, steady consistent uptrend.

I assume all these negative folks on television have already sold.

Frozen in the North said...

Hold on

CBP were you not the one saying that the Feds had to cut rates immediately to stop a recession (that was like two months ago), and Johnny Bee Dawg was in total agreement!

I would say that the trucking data seems to support economic growth, but that the price of copper says something else. I would bet that a recession will not start in the US (Europe is looking very weak now), but it may well infect the American continent. One question, there were news reports of layoffs in the trucking industry just three weeks ago -- I'm sure I saw that! Were you able to drill the data down, in terms of where the growth in trucking demand is happening (probably not possible).

One thing for sure the White House, the Treasury, and the Federal Reserve are all working hard at preventing a recession (joking aside it is part of their job...). the Keynesian boost that the US economy is getting from the massive Federal Government deficit (Yep that's what it's called when the government's deficit is running at 5.1% of GDP) up fro 3.8% in 2018 has boosted the economy for the past two years. Treasury seems to think that it will fall in 2020 (although their 2019 predictions in 2018 was for the current deficit to shrink in 2018 and treat their data with some care). I suggest that this alone is responsible for the current positive GDP growth (since S&P500 corporate CAPEX is way off from previous years -- they at least don't seem to be very positive on growth...).

Just so we are clear in the last year of Obama's administration it was slightly over 2% -- as usual deficit are only a problem when democrates are in power...also I don't really care

Tom L said...

thanks Scott for your continued analysis!

Scott Grannis said...

Frozen: I have indeed been calling for the Fed to cut by more than they have so far, but I've also said that failing to cut sufficiently was not a fatal mistake (see my post of August 1st). The economy is not starved for liquidity. Credit spreads continue to be very low. The economy is not at risk of recession because of Fed policy actions. It would be better if they cut 50 bps now rather than waiting, but we'll survive regardless.

The key thing to remember is that this time Fed policy works VERY differently than it did prior to 2009. The Fed changes short-term rates by simply saying so. Before, they changed rates by adding or subtracting reserves from the banking system. Subtracting reserves puts a squeeze on liquidity conditions and that can aggravate economic weakness. That's not the case today.

Grechster said...

To all of those who think the Fed should not be cutting rates:

What do you think the 10-year breakeven is telling you? (It's 1.55%, btw)

I listen to interviews from various Fed governors and it becomes apparent that they don't know much. It's embarrassing.

A "strong" economy does not necessarily mean the Fed shouldn't lower rates. I would argue that 2% GDP growth isn't strong, in any event. But we are in one of those times in which we are growing at an acceptable rate (2%) and money is STILL too tight.

We should demand all Fed governors read, or re-read, Jude Wanniski. If the supply of money is not adequate relative to the demand for money then the Fed should cut. It doesn't matter what GDP is. Strong employment is NOT inflationary!

Side note: I'm not a fan of the president. And it may be the case that he's right for the wrong reasons. But he is in fact right when he says the Fed should lower rates; 50 bps from here, by my work. And the sooner, the better.

Bob Pool said...

I find it interesting that you correlate truck tonnage to the S&P 500. Of course it makes sense. I owned and operated lodging in Big Bear for the last 40 years. From 1980 to 2000, I found I could accurately correlate my ADR to Interest rates. I have never seen anyone talk about lodging rates that way. There was a company called Laventhal and Horwath (I believe) in those days, and working with them, I found some agreement. I read every post of yours and would be interested in your thoughts. Thank you for this blog.

Benjamin Cole said...

Keep on truckin'!

Sorry I could not resist.

Bob Pool: I remember Laventhol and Horwath too. Also, a reporter at the Los Angeles Times with your same name.

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The Cliff Claven of Finance said...

Railroad intermodal units not so good.

Down '4% in 2019, through the third week of September, versus the same period in 2018.

Not as bad as it sound because 2018 was a good year.

The first three weeks of September 2019 have averaged worse than -4%

Railroad intermodal units lead truck tonnage.

The Cliff Claven of Finance said...

Hey Johnny Bee Dawg

Hope you will be enjoying the Trump impeachment "inquiry".

Trump wanting to investigate actual extortion by Joe Biden, that he bragged about on video, is an "impeachable offense".

Joe Biden extorting the leader of Ukraine is "family values" -- protesting his son.

My article on the new Ukraine Collusion Delusion is here:

I think you would like it Mr. Dawg.

Say hi to your motorcycle gang.

I love to remind you, and other readers here, that the
S&P 500 closed at 2,962 yesterday, up a mere +3 %
from the 2018 peak of 2,873 on january 26, 2018,

Not much progress in 19 months.

Something must be wrong with the US economy,
or with Trump.

Don said...

Cliff...neither actually

steve said...

Cliff, for the life of me, I don't understand why you keep harping on the S&P500 return and a weak US economy. Stocks don't go up in a straight line! That said, VFINX, a surrogate for the S&P500 has a total return of 13.2% acr for the past three years, 10.5% acr for five, 13.2% acr for 10 and 8.9% acr for the past fifteen years. Moreover, it's trading a touch over 2% below it's all time highs.

Looks OK to me.

The Cliff Claven of Finance said...


The S&P 500 is a very well known large cap stock index.

The numbers I provided were correct at the time of my last comment.

Anyone who thinks everything is fine with the US economy after the S&P 500 is up only +3% in 19 months is overoptimistic.

The S&P 500 market average is telling us everything is not fine.

VFINX is up +2.8% in the past year.

Ho hum.

steve said...

ISM manufacturing index dropped to contraction levels and our moron POTUS blames the Fed! So he wants us to believe that if short rates were .25% lower all would be hunky dory. Virtually every CEO has come out an said uncertainty re china and trade is the culprit. Of course, this impeachment shenanigans won't help. Will DT capitulate and call in the dogs? I seriously doubt it. Too stupid and proud to admit he's wrong. And the best alternative is Lizzie Warren? Good grief, what kind of country do we live in that these two clowns are the best we can off the American voter.

randy said...

It's starting to look like Trump is going off the rails. Now doubling down on asking China to investigate Biden? Has the feel of someone saying "go f&*# yourself" to everyone. I can't see how this makes sense for someone that actually wants to remain President.

Johnny Bee Dawg said...

The bottom half of S&P500 members ranked by volatility are best suited for a sideways market...especially one purposely throttled by a hostile and incompetent Federal Reserve. Low vol has shown strong relative strength vs high beta for well over a year.

The S&P Low Volatility index is up 50% since Election Day, including dividends.
Its up 19.9% since Jan 26, 2018.
All despite the Fed's incompetence and purposeful harm.

At the end of Jan 2018, Janet Yellen's rate hike in opposition to bond market signals caused the fastest 10% drop in the S&P from all time highs in US history.
Once the market recovered back up to highs in Oct, Jay Powell hiked rates TWICE, in opposition to bond market signals, utterly destroying the stock market in the 4th quarter. Insanity. Rate hike a month before an election. Hmmm.

Once stocks returned to all time highs in July of this year, Powell's comments in his Q&A caused a 500 point drop in less than 5 minutes. That was followed by more confusing and incompetent comments after his tepid Sept rate cut. The Fed insists on keeping Fed Funds higher than every government bond on the planet...unprecedented in all of history. The short end of the curve remains inverted since March, while Powell fiddles and babbles. "Experts" say this is no big deal.

The market repeatedly rallied to new highs after every new tariff announcement, only to be knocked down each time by Fed actions or comments. Its the Fed, not the tariffs.
The former head of the NY Fed (the most powerful regulatory arm of the Fed) wrote that a legitimate function of this Fed is to get the President of the USA removed from office. Layed it right out in the open.

Here we are struggling to get back up again.
The Fed is the reason the market is struggling to make progress.

Steve Leesman today explained that the "sugar high" from the corporate tax rates is over.
An "economist" telling us that a tax cut has no lasting benefit.
He also explained that today's report shows that the consumer has "rolled over". Hmmmm.
Wishful thinking, Swampers.

Steve spent several years living in Moscow. This is our economic media.
Meanwhile, Swamper are staging a coup...with zero evidence of a high crime or misdemeanor.
God Bless, Donald. The Swamp is the biggest enemy of America.

randy said...

The Atlantic regarding Trump and the Swamp. Yes the Atlantic is "MSM". The insight is still valid.

The last serious effort to "drain the swamp" in Washington, D.C., came after Watergate, when Congress pushed through sweeping reforms inspired by the misdeeds of Richard Nixon’s administration and the backlash its criminal acts produced.

The new ethics rules and laws forbade some lobbying by former members of Congress and their staffers; forced elected officials and some of their family members to disclose their financial interests; limited the franking privilege; imposed limits on individual contributions to candidates for federal office; imposed reporting requirements on campaign spending; introduced public funding into presidential campaigns; and sought to limit how much candidates could spend on their own campaigns (a restriction the Supreme Court later struck down).

The same era witnessed unprecedented efforts to probe the national-security apparatus, culminating in efforts to expose bygone misdeeds and constrain the CIA, NSA, and FBI.

Put simply, there wasn’t just talk of cleaning up Washington; there was an earnest, successful effort to pass reforms that might plausibly decrease abuses.

What has Donald Trump done in comparison?

Some of his supporters still believe that he is draining the swamp, but they cannot point to any significant reform he has signed into law. They cannot point to a reform agenda he has sought to enact, only to be thwarted by Congress. They certainly cannot point to any investigative effort on a par with the Church Committee, the Pike Committee, or the Rockefeller Commission.

Trump’s interest in possible misdeeds extends no further than the specific Democrats he considers his most direct political adversaries, such as Hillary Clinton. For all his theatrics, he is not actually fighting corruption any more than a WWE wrestler is actually fighting his opponent. Put simply, there is no prospect that he will, in fact, drain the swamp.

Fred said...

There was no reason for holding up the military aid to Ukraine other than to put pressure on them to investigate Trump's political opponent. Trump abused his power as President for personal gain and should be impeached and removed from office so we can run a decent candidate against the crazy socialists democrats. I know some on this blog thing God sent Donald to clean out the swamp but that is just false. He needs to go. Just ask all the competent people who worked for him who have resigned.

Johnny Bee Dawg said...

God Bless Donald!
Congress is supposed to have evidence of high crimes and misdemeanors to impeach a POTUS.
And there isn't any.
Exposing criminal behavior of the previous administration isn't for "personal gain".
Its for America's gain.

Trump is doing exactly what he was elected to do.
First President in my lifetime who methodically goes about keeping all his campaign promises.
That's why his approval ratings are at new highs.

The coup attempt wont work. He won't be removed from office, and he'll win a second term as long as he beats the election RIG again. They wont be so lazy this time, though.

And once he wins, the market will have another leg up....postponing socialism for another 4 years.

Fred said...

You can ignore facts if you wish but Trump clearly violated the law by asking Ukraine to investigate Biden knowing that aid had been suspended after Congress approved it. Screwing around with national security for personal gain is very dangerous and he deserves to be impeached and removed for this. It's unlikely there will enough votes now to remove him but the country would be better off without him. Removing him might hurt my stock portfolio but I love my Country and the Constitution more and want it to survive for my children.

Johnny Bee Dawg said...

Which law, Fred? What evidence, Fred? What "facts", Fred?
Have you bothered to read the transcript of the phone call, or do you have some other secret document that only you and Adam Schiff have seen?

Its a joke write about loving the Constitution, while rooting for an illegal coup of a duly elected POTUS who beat the RIG, and has followed Constitutional restrictions to a T. Trump has followed the Constitution more faithfully than any President in my lifetime.

FWIW, Quid Pro Joe literally did the very thing that DEMs accused the President of doing. The entire reason for the witch hunts is to try and head off investigations into their own criminal behavior.
You ever notice that Socialists/Leftists overwhelmingly accuse others of the very thing they are doing, themselves?

Fred said...

JBG: why did Trump hold up the aid to Ukraine? Not a single state department official had a good explanation for it other than that Trump was holding it to put pressure on Ukraine to dig up dirt on his political opponent. That is illegal and more than satisfies the standard for impeachment. John Bolton urged Trump to send the aid knowing withholding it contravened the will of Congress. If you believe Trump was merely trying to root out corruption you are naive. Moreover, Biden's corruption in no way excuses Trump's.

The Cliff Claven of Finance said...

You are completely wrong claiming Trump violated a law.

The Justice Department already made that conclusion.

In fact, Trump OBEYED a 1990's Bill Clinton agreement with Ukraine to help each other investigate corruption involving Americans and Ukrainians.

It was just this year that a 2018 video of Biden bragging about breaking the law in 2016, concerning extortion of the Ukraine president.

I am proud of Trump for not looking the other way -- he followed the law.

Fred, I suppose you just LOVED the Mueller Team where ONLY Democrats investigated ONLY Republicans ?

And now you seem to believe Republicans MUST BE INVESTIGATED at all times, even with no evidence of a crime, while Democrats must never be investigated EVEN IF they brag about a crime on video ?

If running for office means one can not be investigated for a crime, then I'm announcing that I'm running for president in 2020 !

Fred, did you not recall that BOTH Hillary Clinton and Donald Trump were being investigated for crimes during the 2016 campaign ?

It was a fake investigation for Hillary, and an unjustified investigation for Donald, but running for election DOES NOT MAKE a person exempt from an investigation !

Trump said he DELAYED the aid to Ukraine so he could try to convince European nations to fund part of the aid.

There is no evidence his claim was a lie.

That did not seem to work, but Trump had a good intention.

The aid WAS provided in full before the Leaker Letter became public, at the request of a Republican Congressman, who met with Trump and told him Ukraine really needed the money -- it was delivered that day.

The Ukraine president has stated he was NOT pressured by Trump, and no one in Ukraine even knew the US aid was delayed until one month AFTER the phone call.

Fred, you are entitled to your own opinions, but not your own "facts".

I have written six articles on the Ukraine Collusion Delusion in my politics blog, here:

In late 2016, at that blog, I explained why the RTrump ussian Collusion Delusion was a hoax -- 2.5 years before the same conclusion by the Mueller Report.

The Cliff Claven of Finance said...

no space between Election and Circus

Fred said...

Cliff: Congress approved the aid to Urkraine without any conditions to help it defend itself against Russian aggression. There is no evidence that Trump withheld it "to pressure" allies to help with the payment. That is just after the fact BS by Trump to come up with an excuse after he got caught abusing his power. Again, follow the lead of good Republicans like John Bolton who have abandoned Trump (like all the Generals he lauded before they woke up) as sufficient proof that he is corrupt and must be removed. I have never voted for a Democrat and never will but I can't ignore Trump's misconduct.

The Cliff Claven of Finance said...

100% of the promised aid got to Ukraine.

No one in Ukraine knew it had been delayed, until one month after the phone call.

The president of Ukraine said he was not pressured.

The president of the US said he wanted the EU to contribute their fair share.

You, Fred, live in an alternate universe where you think:

-- EVERYBODY involved in the phone conversation is lying,

-- the phone transcript is lying,

-- the Justice Department is lying about there being no crime,

-- the leaker is a perfect "witness" -- and never mind that he had no first hand information, had a legal team write "his" letter, met with Shifty Schiff to make sure "his" letter was good enough, and will not show his face --vwell, that's ENOUGH "EVIDENCE" FOR YOU GULLIBLE LEFTISTS !

The Biden's are crooks.

Joe Biden is on video bragging about a crime.

He will never be president.

Not one mainstream media outlet, other than Fox News is even interested in Biden's confessed crime.

Trump is the most investigated president in history -- no crimes found, except in your leftist imagination.

The Ukraine Collusion Delusion just replaced the Russian Collusion Delusion.

One lie replaced by another lie.

John Bolton is a warmonger, and I'm glad he is gone.
He is one of the worst Republicans in the history of Republicans.

Fred said...

Cliff: you are like your namesake. A fool who has no self-awareness.

The Cliff Claven of Finance said...

Meaningless, childish character attacks
do not refute anything I have written.

They also do not make you appear to be a brainiac.

But that was your choice.