• 3 hours Gold Hangs At $1,300 Ahead Of Fed Meeting
  • 5 hours Champagne Sales Slow As European Economic Worries Grow Louder
  • 21 hours Putin Signs “Digital Iron Curtain” Into Law
  • 24 hours Russian Metals Magnate Sues U.S. Over Sanctions
  • 1 day Tesla Looks To Jump Into Indian Market
  • 1 day Global Banks Lay Groundwork To Re-Inflate Asset Prices
  • 2 days Homeowners Experiment With Risky New Investment Trend
  • 2 days U.S. Tech Stocks Look Increasingly Vulnerable
  • 2 days De Beers To Expand World’s Most Profitable Diamond Mine
  • 2 days Ford CEO Gets Raise After Massive Layoff Round
  • 3 days Germany’s Flirtation With Recession Could Cripple The Global Economy
  • 3 days Where To Look As Gold Miners Inch Higher
  • 4 days Google Faces Billions In Fines From European Regulators
  • 4 days The Energy Industry Has A Millennial Problem
  • 5 days Russian Banks Scramble For Sanction Loopholes
  • 5 days Gold ETFs Take A Hit After Four-Month Run
  • 6 days European Union Takes Aim At Ten New Tax Havens
  • 6 days Goldman Defends Trillion-Dollar Corporate Buyback Spree
  • 6 days $600 Billion At Risk As Boeing Fallout Continues
  • 6 days Venezuela Has Yet Another Crisis Developing
Lending: The Good, Bad, And Ugly

Lending: The Good, Bad, And Ugly

Aristotle said, “The most hated…

The Chatroom Cartel Running Global Bond Markets

The Chatroom Cartel Running Global Bond Markets

Eight major banks have been…

  1. Home
  2. Markets
  3. Other

Heavy Truck Sales vs. GDP: Sales Plunged 29% in August from Year Ago

There's an interesting correlation between heavy truck sales, GDP, and the S&P 500. If the relationship holds, it spells bad new for the already weakening second half recovery meme.

"We've never seen a plunge this steep that didn't foretell a recession," says Bloomberg columnist David Ader.

Bloomberg reports As Heavy-Truck Sales Go, So Goes the Economy

For most people, the economy's ups and downs are best measured by famous indicators like monthly job reports and quarterly releases of gross domestic product. But students of the arcane took special notice earlier this month when the Bureau of Economic Analysis released some disturbing data that didn't make anybody's front page. In August, domestic heavy-truck sales fell 29 percent from the same period of 2015, the weakest month in well over three years.

Any drop that dramatic could always be an anomaly, but heavy-truck sales have been slipping for two years. Broad weakness in this category has historically been a reliable hint that a recession is on its way.

There are other worrying signs. Caterpillar has said that used-machinery prices are down 10 percent from a year ago. That could also reflect the impact of oil and mining industry problems, yet a price decline in used construction equipment could have a dampening impact on new-equipment sales for big manufacturers.

Another warning comes from the Cass Freight Index, a measure of North American freight volumes and expenditures. In August, Cass noted that its Expenditure Index was down 3.3 percent from July and 6.3 percent from the previous August. These measures, too, have shown weakness over the last two years.

Weak truck sales have sometimes given false signals about a recession over the last 30-odd years. But the sheer size of this August's drop looks different. We've never seen a plunge this steep that didn't foretell a recession.


Hitting the Brakes

Monthly heasvy truck sales versus GDP growth


Truck Sales vs. S&P 500

S&P (CPI adjusted) versus US Heavy truck sales


Cass Freight Index

I regularly follow the Cass Freight Index. It has indeed been performing miserably.

Cass Freight Index Shipments

Cass Freight Index Shipments

Shipments have risen every month this year. Shipments are up 0.4% from last month.

However, month-to-month fluctuations is a very poor way of looking at things. The Cass index is not seasonally adjusted. Shipments normally rise from January forward. Towards the end of the year, shipments will start declining.

Instead compare August shipments to August shipments in prior years. Shipments are lower than in 2015, 2014, and 2013. It's a clean sweep of weakness.

Cass Freight Index Expenditures

Cass Freight Index Expenditures

The plunge in trucking expenditures is unusually steep compared to prior years. It's a strong sign of huge overcapacity in the industry.

 

Back to homepage

Leave a comment

Leave a comment