Transportation companies are often seen as a bellwether of the broader economy. After all, if retailers see demand slump, they are likely to reduce their orders, causing transportation companies to suffer. In addition, transportation indexes are not just a barometer for US manufacturing but also for global trade, as most foreign goods are shipped to US ports and then trucked to their final destination. For this reason, economists monitor US transportation volumes and shipping rates for an indication of the broader economy.
The trucking industry in particular is considered to be a strong indicator of US economic activity because goods are so often transported via semi-trucks to their final destination.
So far this year, trucking freight volume has fallen into negative territory as shipments have declined, and trucking firms have dropped prices to compete for contracts. The weakness in the industry has impacted access to credit and resulted in a sharp pull-back in demand for heavy duty trucks. In fact, new orders for heavy duty trucks declined 34% over the past year to a four year low.
To the extent that the weakness in trucking may be an indication of overall economic activity, the decline in trucking indicators is a concern.