EconomicsMarket InsightNews

Believing in the wisdom of the crowd

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We believe in the wisdom of crowds.  The more individuals participating in a marketplace, and the more money that is being transacted in that marketplace, the more predictive that marketplace becomes. We also accept that trucking is one of best indicators of the overall U.S. economy. All segments of the economy use it to transport everything from the raw materials used to manufacture and assemble goods, to the finished goods consumed by all of us, even those of us in the service/non-manufacturing economy (contrary to those who claim our migration to a more service-based economy has made trucking a less relevant economic indicator). 

We believe the best leading indicators for trucking were already predicting a broad economic recovery, but then two hurricanes made landfall in two areas of the country which are both well insured and economically prosperous enough to rebuild quickly.  As a result, we saw dislocations of equipment (Houston is the largest flatbed market in the U.S.), followed by surges in demand for first the recovery and now the rebuild of Texas and then Florida.   

We assert that since DAT Solutions sees more trucking companies, more shippers, and more freight brokers than anyone else in the marketplace, the breadth and depth of its data is more predictive than any other source in the trucking marketplace. Our weekly DAT Barometers for dry van, reefer, and flatbed are also the most-timely data industry-wide indicators for trucking since they reflect what happened last week (Sunday – Saturday). 

Here is what they are currently signaling:

The Barometer’s high level for this recovery appears poised to remain elevated through the end of the year, especially given the incremental volumes that will be driven by the post hurricane recovery/rebuild efforts in coming weeks, giving us growing confidence in a more bullish outlook. The Dry Van Weekly Barometer is now predicting even stronger contract pricing in coming months.

Especially given the incremental volumes that will be driven by the post hurricane recovery/rebuild efforts in coming weeks, we believe the DAT Reefer Barometer is poised to retain strength through the end of the year. The current level of DAT Reefer Weekly Barometer is predicting stronger contract pricing in coming months.

The metric originally broke through 50 in early March as the rise in the price of crude back above $50 a barrel drove an increase in heavy industrial activity that began in October of 2016, and continued to improve as oil stayed in the $45 to $50 range (over $50 as we write this). Hurricanes Harvey and Irma are already creating a strong uptick in building material shipments that should create a continued very strong rebound in the DAT Flatbed Barometer in coming weeks.

What about modes outside of trucking?

We have been watching the lumber shipments via rail for over a year and noting that they were falling shy of the volumes necessary to predict continued growth in housing starts.

Post the hurricanes, we have seen a material pick-up in volume that is quickly easing our concerns about a slowdown in housing. We should admit that when it comes to this industry which is key to the overall economy, we are location agnostic. We know that over time there will be areas of boom and areas of bust, just as long as the overall market continues to grow we remain sanguine. That said, the rebuilding efforts in Texas and Florida appear to be ‘just what the doctor ordered’ at least in the short to intermediate term.  Stay tuned…

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Donald Broughton, Principal & Managing Partner, Broughton Capital

Prior to starting Broughton Capital Mr. Broughton spent nine years as the Chief Market Strategist and Senior Transportation Analyst for Avondale Partners. Before that, Mr. Broughton spent over twelve years at A.G. Edwards. At A.G. Edwards, in addition to being the Senior Transportation Analyst, he was the Group Leader of the Industrial Analysts and served on the firm’s Investment Strategy Committee. Prior to going to Wall Street, Mr. Broughton spent eight years in various distribution and operations management roles in the beverage industry, including serving as the Corporate Manager of Distribution for Dr. Pepper/Seven-Up companies and Chief Operating Officer for Bevmark Concepts.