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    0.042
    2.8%
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    -57.980
    -0.5%
  • OTRI.USA
    6.020
    0.110
    1.9%
  • OTVI.USA
    10,502.790
    -61.450
    -0.6%
  • TLT.USA
    2.440
    -0.020
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  • WAIT.USA
    150.000
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Cass predicts economic contraction after eighth consecutive month of shipping declines

Analysts less sure of downturn though agree economy is slowing

The July Cass Information Systems Inc. Freight Shipments Index sounded dire warnings for an economic contraction following the eighth consecutive month of negative year-over-year numbers.

“The shipments index has gone from ‘warning of a potential slowdown’ to ‘signaling an economic contraction,’” Cass said in its July report, released on Thursday, August 15.

The index dropped 5.9 percent in July following a 5.3 percent drop in June and a 6.0 percent decline in May.

A look at the year-over-year percentage change in shipments beginning in 2013 (Cass Information Systems Inc,)

“We see a growing risk that gross domestic product (GDP) will go negative by year’s end,” the Cass report said. The index has turned negative in the past without being followed by a negative GDP. However, weakness in demand is now being seen across many modes of transportation, both domestically and internationally.

Spot freight market

Weakness in spot market pricing for air cargo, rail and especially trucking “is consistent with the negative Cass Shipments Index and strengthens our concerns about the economy and the risk of ongoing trade policy disputes,” Cass said.

The dramatic decline in spot trucking rates is partially explained by private fleets “clawing back” loads from for-hire companies that raised spot rates 25 percent and contract rates 15 percent in early 2018. So, even though freight is growing slightly, fewer loads are available on the spot market, according to Kenny Vieth, president of ACT Research.

Companies such as Walmart, Target and Toyota that typically used for-hire carriers to cover long haul but handled distribution on their own updated and expanded their fleets in the face of uncontrolled load costs, Vieth said. Now that spot rates have come down, some of those loads may be offered on the spot market.

Goods economy

Lower commodity prices and interest rates further suggest an economic contraction, Cass said.

“The goods side of the economy is still only about one-third of all economic activity,” said Ibrahiim Bayaan, a market expert at FreightWaves. “If there was a recession underway, you’d see it on the goods side of the economy first. But just because you see the goods side struggling, it doesn’t really mean the economy is contracting.”

Cass said the movement of tangible goods is the heartbeat of the economy, and tracking the volume and velocity of those goods has proven to be a reliable predictor of change because adequate forewarning exists. Cass said its index was early in seeing the U.S. economic recovery that began in October 2016.

“More and more data are indicating that this is the beginning of an economic contraction,” Cass said. “If a contraction occurs, then the Index will have been one of the first early indicators once again.”

Bayaan still sees a potential disconnect.

“A similar sort of thing happened in 2015/2016,” he said. “The Cass (Index) and the goods side of the economy started declining, but the economy still grew.”

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Alan Adler

Alan Adler is a Detroit-based award-winning journalist who worked for The Associated Press, the Detroit Free Press and most recently as Detroit Bureau Chief for Trucks.com. He also spent two decades in domestic and international media relations and executive communications with General Motors.

2 Comments

  1. Quote:
    “Analysts less sure of downturn though agree economy is slowing” ???? LOL !

    You mean to say : Ibrahiim Bayaan ,the so called Freight waves market expert , is “uncertain” or “confused”…………

    Quote:
    “The goods side of the economy is still only about one-third of all economic activity,” said Ibrahiim Bayaan, a market expert at FreightWaves. “If there was a recession underway, you’d see it on the goods side of the economy first. But just because you see the goods side struggling, it doesn’t really mean the economy is contracting.”

    Quote:
    “Bayaan still sees a potential disconnect.
    “A similar sort of thing happened in 2015/2016,” he said. “The Cass (Index) and the goods side of the economy started declining, but the economy still grew.”

    However , Cass is saying differently than what you’re friend Bayaan is insinuating about what Cass stated and suggested back in 2015/2016 based on their indicators !
    Quote:
    “Cass said the movement of tangible goods is the heartbeat of the economy, and tracking the volume and velocity of those goods has proven to be a reliable predictor of change because adequate forewarning exists.

    Cass said “its index was early in seeing the U.S. economic RECOVERY that began in October 2016.” THEREFORE Cass predicted that the economy would GROW !

    AGAIN !

    “Cass said its index was early in seeing the U.S. economic recovery that began in October 2016.”NOT AN ECONOMIC CONTRACTION as your friend is insinuating due to some sort of misunderstanding on his part due to some misunderstood similarity .

    Therefore it appears as if someone is CONFUSED and it isn’t Cass in regards to what Cass reported and suggested would likely occur based on market indicators and what ACTUALLY occurred afterwards due to a misunderstood supposed ” current ” similarity .

    WHERE IS THE SUPPOSED DISCONNECT ???

    Furthermore :
    Quote :
    “Lower commodity prices and interest rates further suggest an economic contraction, Cass said.”
    That’s just part of what they are stating . This is to be interpreted as “deflation” ! AND NOT TO BE TAKEN OUT OF CONTEXT with something supposedly similar that took place in 2016 of which clearly Bayaan is taking out of context and has proven to have misunderstood !

    For the record , I called for an economic contraction in 2018 as well as for the Dow Jones transportation index to take a wild dive along with WTI Crude ! Do you think that I need to depend on some hocus pocus economic update to confirm that it has happened after the fact ? The market leads the economy .

    In this case I’ll side with Cass 100% due to “understanding ” what they are actually talking about ………

    In my humble opinion …………………….

  2. ….

    Isn’t this interesting .
    Let’s listen to this @ 5:57
    Question : Can “you” project this at all ?
    He states that he thinks the worst of it is “probably” taking place in the first quarter .
    https://www.youtube.com/watch?v=27J9GRGGUIY
    Definition of probably:
    “almost certainly; as far as one knows or can tell”
    AND “HE” WAS WRONG !
    Quote:
    “Manufacturing productivity fell at a 1.6% rate in the second quarter, the worst performance since the third quarter of 2017”
    Draw your own conclusion ……………………
    In my humble opinion !
    10-4

    ..

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