{"id":24586,"date":"2011-10-19T10:30:28","date_gmt":"2011-10-19T14:30:28","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/10\/19\/you-can-no-longer-trust-this-%e2%80%9cleading%e2%80%9d-economic-indicator\/"},"modified":"2011-10-19T10:30:28","modified_gmt":"2011-10-19T14:30:28","slug":"you-can-no-longer-trust-this-leading-economic-indicator","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/10\/19\/you-can-no-longer-trust-this-leading-economic-indicator\/","title":{"rendered":"You Can No Longer Trust This \u201cLeading\u201d Economic Indicator"},"content":{"rendered":"<p><a href=\"http:\/\/www.investmentu.com\/2011\/October\/leading-economic-indicator-lagging.html\">You Can No Longer Trust This &#8220;Leading&#8221; Economic Indicator<\/a><\/p>\n<p>by <a title=\"David Fessler Archives\" href=\"http:\/\/www.investmentu.com\/investment-experts\/david-fessler.html\" target=\"_blank\">David Fessler<\/a>, <em>Investment U<\/em> Senior Analyst<br \/>\nWednesday, October 19, 2011<\/p>\n<p>There are many economic indicators. The U.S. Census Bureau <a href=\"http:\/\/www.census.gov\/cgi-bin\/briefroom\/BriefRm\" target=\"_blank\">lists and tracks 13 of them<\/a>.<\/p>\n<p>The <em>Journal of Commerce <\/em>has indicators, too. It&#8217;s a weekly magazine read by logistics executives to help them execute their day-to-day shipping and logistics, as well as their global supply chains.<\/p>\n<p>Not too surprisingly, the <em>Journal of Commerce<\/em> tracks truck and rail transportation. Historically, transportation was always viewed as a leading indicator of economic activity and growth.<\/p>\n<p>And the indicators for transportation seemingly point to a growing economy:<\/p>\n<ul>\n<li>Truck tonnage rose strongly, up 5.2 percent from a year ago.<\/li>\n<\/ul>\n<ul>\n<li>The American Trucking Association numbers seem to point towards a recovery, as well. Its index tracks the change in freight tons hauled by carriers. It increased 10.9 percent from July, and is up 9.1 percent from a year ago.<\/li>\n<\/ul>\n<ul>\n<li>More good news: In the third quarter, all the major railroads in the country broke records. They set an all-time high of 313,026 intermodal container and trailer loadings, according to the Association of American Railroads.<\/li>\n<\/ul>\n<p>So how could we possibly be headed back into a recession with this leading indicator pointing towards a recovery?<\/p>\n<p><strong>Analysts Are Missing Out on the Big Picture<\/strong><\/p>\n<p>Well, according to Satish Jindel, President of SJ Consulting Group in Pittsburgh, analysts who watch cargo numbers are missing the bigger picture.<\/p>\n<p>He believes there&#8217;s a growing disconnect between the overall economy and the amount of freight shipped.<\/p>\n<p>In a recent article in the <em>Journal of Commerce<\/em>, he pointed out that freight carriers &#8220;touch&#8221; less of the economy every year. His estimates that freight really only touches 40 percent of our overall GDP.<\/p>\n<p>The other 60 percent? It&#8217;s the service sector. It doesn&#8217;t ship or produce anything that requires shipping. According to the U.S. Bureau of Economic Analysis, the numbers are even worse than that.<\/p>\n<p>Its statistics indicate a measly 35 percent of GDP relates to personal consumption and fully 65 percent relates to the service sector.<\/p>\n<p>Two great examples of huge service businesses that don&#8217;t require shipping are <a href=\"http:\/\/www.investmentu.com\/2011\/July\/google-challenges-facebook.html\" target=\"_blank\">Facebook and <strong>Google<\/strong><\/a> (Nasdaq: <a title=\"Google (Nasdaq: GOOG)\" href=\"http:\/\/www.google.com\/finance?q=NASDAQ%3AGOOG\" target=\"_blank\">GOOG<\/a>). Both companies generate tens of billions of dollars of revenue while making absolutely nothing.<\/p>\n<p>Throw in all the big banks, insurance companies and numerous other professional services, and you start to get the picture.<\/p>\n<p><strong>Leading Economic Recovery Indicator Starts Lagging<\/strong><\/p>\n<p>The more that the overall economy shifts towards companies that produce no physical product, the less the transportation indicators can be relied on as a leading indicator of economic recovery or downturn.<\/p>\n<p>In fact, it could be that the transportation indicator shifted to a lagging indicator. Most trucking companies are handling goods that were already imported. They&#8217;re already on their way to the end user by the time the consumer stopped spending.<\/p>\n<p>That means trucking companies could continue to have one or two good quarters after things begin to slow down.<\/p>\n<p>It&#8217;s something to think about the next time you hear the talking heads on TV suggesting that transportation is <a href=\"http:\/\/www.investmentu.com\/2011\/October\/are-the-mareket-bears-hibernating.html\" target=\"_blank\">a leading indicator<\/a>. The reality is, that line of thinking may be quickly coming to an end. Adjust your own thinking and investment strategies accordingly.<\/p>\n<p>Good investing,<\/p>\n<p>David Fessler<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=OYSPc6sM4U8:efdTBSbqrHg:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=OYSPc6sM4U8:efdTBSbqrHg:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=OYSPc6sM4U8:efdTBSbqrHg:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=OYSPc6sM4U8:efdTBSbqrHg:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=OYSPc6sM4U8:efdTBSbqrHg:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=OYSPc6sM4U8:efdTBSbqrHg:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=OYSPc6sM4U8:efdTBSbqrHg:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=OYSPc6sM4U8:efdTBSbqrHg:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/OYSPc6sM4U8\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>You Can No Longer Trust This &#8220;Leading&#8221; Economic Indicator by David Fessler, Investment U Senior Analyst Wednesday, October 19, 2011 There are many economic indicators. The U.S. Census Bureau lists and tracks 13 of them. The Journal of Commerce has indicators, too. It&#8217;s a weekly magazine read by logistics executives to help them execute their &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2011\/10\/19\/you-can-no-longer-trust-this-leading-economic-indicator\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;You Can No Longer Trust This \u201cLeading\u201d Economic Indicator&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24586","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24586","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24586"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24586\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24586"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24586"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24586"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}