Cass Freight Index Takes Another Dive Killing August's 'False Hope'

By: Mike Shedlock | Wed, Oct 19, 2016
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Heading into the Christmas shopping season, the Cass Freight Index shows shipments sank 0.4% for the month and are down 3.1% from shipments a year ago.

It's difficult to make a case for a great holiday sales season or robust third quarter GDP, based not only on shipments, but also on many other factors discussed below.

After offering a glimmer of 'less bad' hope in August (only down 1.1% YoY and up 0.4% sequentially), the Cass Freight Index shipments data in September disappointed, providing hindsight that August only gave us 'false hope.' September data is once again signaling that overall shipment volumes (and pricing) continued to be weak in most modes, with increased levels of volatility as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels.

Cass Freight Shipment Index

Cass Freight Shipment Index

Shipments are lower than in 2015, 2014, and 2013.

Cass Freight Expenditures Index

Cass Freight Expenditures Index

Expenditures are lower than in 2015, 2014, and 2013.

Rail Volumes

US Weekly Railroad Carloadings

Rail volumes are lower in 2016 than 2015 and 2014.

Rail Volumes vs. US Dollar Index Inverted and Advanced 6 Months

Rail Volumes vs. US Dollar Index Inverted and Advanced 6 Months

Inventory Contribution to GDP

Inventory Contribution to GDP

Cass Comments

Mish Comments

This mythical GDP build based on inventories keeps sinking in to the sunset. In particular, auto inventories have soared, and autos have been one of the few bright spots in the economy.

The other bright spot has been housing. While not robust, it has been reasonably solid. However, prices home buyers have been able or willing to pay keeps declining.

Thanks to Obamacare, medical premiums have soared. Today's CPI report (see Bloomberg Cheers Rising Rent and Gas Prices: Parrots vs. Humans) shows additional cause for concern.

Rent, energy, and medical costs are up. This will impact discretionary spending.

Inventory Crisis: Can Parrots Read Charts?

Merchant Wholesalers: Inventories to Sales Ratio

Bloomberg cited tight management of inventories. My conclusion was parrots cannot read charts.

SupplyChain notes an inventory crisis with retailers caught in a dilemma. Retailers need inventory, but they are not moving it well.

Inventory Management

  1. Warehouse vacancy rates in many major cities sit below 5%
  2. A glut of inventory is building up in across retailers in the US
  3. Retailers turning to direct shipments as a clever way of reducing inventory burdens

For more details, please see Inventory Crisis: Can Parrots Read Charts?

Finally, the November election will leave at least half the country in a sour mood.

All things considered, things are not shaping up well for third quarter GDP and estimates are falling like a rock, as expected in this quarter.



Mike Shedlock

Author: Mike Shedlock

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Mike Shedlock

Michael "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Visit to learn more about wealth management for investors seeking strong performance with low volatility.

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