http://www.cnbc.com/2016/09/08/transportation-planes-trains-and-trucks-point-to-economic-downturn.html
Sunday, September 11, 2016
Transportation Industry Predicting Economic Decline
The transportation industry has historically been a strong indicator of an economic downturn. It has been proven that in an economic decline, one of the first industries to show this decline is transportation. More specifically speaking, the the plane, boat, and train industries are usually a prelude to economic growth/ decline as whole. The graph below shows the freight transportation index (FTI). It is interesting to note that the decline in the FTI at the beginning of 2008, is similar to the decline in 2016. A very large portion of freight usage comes from the transportation of raw materials to manufacturers. If manufacturers are not expecting growth, or even a decline, they are not going purchase and transport more raw and intermediate goods. This is really a self fulfilling prophecy. If the manufacturing companies are predicting an economic decline then they will not purchase, transport, and produce more goods which will in itself negatively effect the economy.
http://www.cnbc.com/2016/09/08/transportation-planes-trains-and-trucks-point-to-economic-downturn.html
http://www.cnbc.com/2016/09/08/transportation-planes-trains-and-trucks-point-to-economic-downturn.html
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It is really interesting being able to use TSI as an indicator for the economy, according to the article, a decrease in TSI may indicate a recession or a growth slow down. The possibility of a recession has increased by prediction, and the under performing airline stocks, might indicate the GDP growth for this year is not entirely positive.
ReplyDeleteI think this correlation between the transportation industry and the overall economy is very interesting and relevant. I think it is a good forewarning to a possible near-future downturn, and economists think so too. The article said that economist polls a year apart say the likelihood of another recession within a year is up from 8% to 21%.
ReplyDeleteI find this very interesting because I never before had thought about the relationship between the transportation industry and how our economy is doing. Out of all the factors that effect our economy I had not realized how our FTI rate can show us if our economy is on a decline like it did in 2008 and is now showing a similar decline in 2016
ReplyDeleteThe article mentioned that personal and business travel also changes with the economy. I've actually noticed this while traveling to and from home recently. When I was a freshman and sophomore, all my flights would be booked full. The past few flights to and from Ohio have had very little people on them. My most recent flight had 40 people on a 140 person plane. I'm wondering if this is just a rough patch or if it is following the pattern the article is talking about.
ReplyDeleteI think the transportation industry, as well as the housing market (as seen in 2008), are good indicators of economic movement, however I think it is too soon to be predicting our next economic recession to be in the next 5-10 years. It seems the last downturns reflecting the size of the one now were in 1994, and 2002, and the events indicating those events, such as 9/11, did not predict an economic recession. I think if there was more data, it would be easier to identify if this trend was worthy enough to follow and use as a predictor for growth or oncoming recessions.
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