Wednesday, August 22, 2018

Keep on truckin'

Chart #1 is one of the most bullish I have in my extensive chart inventory:

Chart #1

The nations' extensive fleet of trucks has hauled almost 8% more tonnage in year ending July '18. Since just before the November 2016 election, truck tonnage is up 15%. This is powerful evidence that the physical economy is expanding, and at an impressive rate.

Meanwhile, I see and hear more and more evidence of a pickup in business investment. My brother-in-law is in the midst of significantly expanding his fleet of trucks to handle new business, and he is scrambling to get it done before immediate expensing expires. Incentives DO matter to business. Businesses are ramping up investment, and we should see increasing evidence of this in the months to come.

UPDATE (Aug 24): More signs of increasing business investment. Chart #2 shows capital goods orders, which are a direct indicator of business investment. Orders are up 15% since the end of 2016, likely boosted by tax reform, after declining over the previous four years. Orders are up 8% in the year ending July '18. (Note: I'm using a 3-mo. moving average for capex orders in the chart in order to correct for what appears to be faulty seasonal adjustment. The percentage changes referred to above are based on monthly data.) I would add that while nominal orders have been rising at a fairly impressive rate of late, they are still down significantly in real terms compared to where they were in the early 2000s. What this means is that business investment has been rather tepid in the past 18 years, and that is undoubtedly one of the reasons the economy experienced a weak recovery following the 2008-9 recession.

Chart #2


Andrew said...

That is an impressive and encouraging chart.
Thanks for sharing.

Curious about the 2006-2008 time period though.
The S&P 500 was climbing during 2007 while truck tonnage was in decline.
Then just as truck tonnage started to pick up, the market began to sink.

Any thoughts about why truck tonnage would pick up like it did in late 2007 to 2008 at a time that the market was starting to back off?

Johnny Bee Dawg said...

Making America Great Again said...

Is immediate expensing just pulling forward demand just like y2k? We remember what happened to the market in 2000. Any chance of immediate expensing being made permanent in tax cuts 2.0?

Unknown said...

The Trump Bump looks more like a resumption of a steady trend under Obama that was interrupted with a flat year prior to the election when it looked like Hillary would win. That's another good example of fear in advance of likely democrat wins, and by the same token, it is common to see over optimism in advance of likely republican wins. Then in reality, the economy keeps chugging along regardless of who wins until the next bubble or unexpected crisis that induces a recession. But it's always fun to see how democrats interpret the data and how republicans interpret the data and both somehow manage to see their guy as doing a great job. Being an independent always feels like I'm disagreeing with everyone, ha ha.

Benjamin Cole said...

Love the charts. Keep on truckin'.

I was looking at the FRED capacity utilization chart. Capacity utilization rates have been declining for decades.

I don't know what this means. Maybe just measurement issue.

But I think it means the US has a long upside ahead if the Fed does not intervene. They say labor markets are "tight" and maybe that is true.

But I say higher wages are the best thing possible for America. I hope we see decades and decades of higher wages. That will be a nice problem to have.

Scott Grannis said...

Capacity utilization is hard to take seriously. No one goes out to measure how much idle production capacity is being utilized at any given time. This is perhaps the number most subject to error of all the stats that the government puts out. It's all based on some estimates and assumptions that the Fed uses.

Benjamin Cole said...

Scott: it may also be that domestic capacity utilization rates are no longer that important. If there is a shortage of any good or commodity it just gets imported.

Trumps tariffs may place a wrinkle in this, but hardly enough to matter.

My sense is that the supply-side is ready and willing...

Johnny Bee Dawg said...

Trump tarriffs seem to be helping along trade negotiations. Market soaring to all time highs. Accounts are screaming higher.

Market loves Trump.

Rich said...

Get rid of the Orange Menace and you may have something worth preserving. But as long as these policies are attached to a despicable person who disrespects a hero like John McCain, no thank you.

Johnny Bee Dawg said...

Songbird the hero
USS Forrestal, cell mates, Keating 5, ISIS, POW-MIA families

Tom Nugent said...

The recent news about a shortage of truck drivers may also impact this data negatively. Watch for similar data from the railroad industry.