“….since the end of World War II (the period for which
we have reliable data) there has never been an economic contraction without there first
being a contraction in freight flows.”
January’s reports were just released, and while the volume of shipments came in “slightly negative” in January (compared to a record January ’18), the overall internals of the report have odds favoring continued expansion going forward.
However (consistent with what we’ve been preaching herein), the dark cloud of protectionism looms large over the freight industry.
From the report: emphasis mine…
“The tariffs and threats of even higher tariffs with China, the world’s second
largest economy (even though the latest headlines and tweets suggest there
may be a resolution). Tariffs have throttled volumes in some areas of the U.S.
economy, most notably agriculture exports and other select raw materials.”
“Recent airfreight volumes in both Europe and Asia suggest that those economies
have cooled. As we’ve outlined, trade tariffs that slow the rate of growth for our global
trading partners pose a real threat to the U.S. rate of economic growth.”
On a somewhat more optimistic note, the report states:
“While we are closely monitoring these trends and looking for signs of contagion, we
are not finding any materially meaningful evidence of it. We continue to see the
current scenario as most analogous to the 1997-1998 Asian currency crisis.
These potential problems acknowledged, we maintain a cautiously bullish outlook since
the freight markets, or more accurately goods flow, have a well-earned reputation for predictive value without the anchoring biases that are found in many models which
attempt to predict the broader economy.”
In summary:
“Each of these data sets supports our assertion that the Cass Shipments Index is
indicative of continued economic expansion.”
Bottom line: As our latest macro assessment as well suggests, general conditions — while notably weaker than they were a year ago — remain expansionary. How long that remains the case clearly depends on the state of global trade going forward…