Warning Signs from the Freight Industry

Warning Signs from the Freight Industry

For several months now, key economic data such as ISM Manufacturing PMI and Durable Goods Orders, which speak to the health of the industrial sector of the economy, have been deteriorating. The Allegiant team also likes to gauge how this portion of the economy is faring by looking at how the freight industry is doing, and particularly the growth trajectory of the volume of shipments the industry is responsible for.

As you can see in the chart above, freight volume growth peaked in the early part of 2018 which coincided with the beginning of the trade dispute that is still ongoing. The data set has been on a sharp descent ever since, which has been supported by numerous other economic data sets, showing that business investment, housing, and industrial production are all on loose economic footing. If the dollar holds its strength and trade concerns continue to weigh on business activity and confidence, freight volume growth may continue its current trend lower. On the other hand, however unlikely it may seem in the near term, if the U.S. and China can come to a trade agreement and the Fed continues to be supportive, we could see the manufacturing economy return to a stronger growth trajectory. Regardless of where the data set moves, the Allegiant team will be watching and prepared to respond accordingly.