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Was November a Turning Point for Freight Demand?

Freight ResearchPublished on December 17, 2019

With today’s November industrial activity data, it’s likely that the worst of the freight recession is now squarely in the rearview mirror.

The November report was a clear improvement from October, though it’s important to keep some caveats in mind. It was always going to be easy to beat October: The closing days of the GM strike took a toll on industrial activity across the board with motor vehicle and parts production plummeting about 6 percent from the prior month in both September and October. The automotive sector supply chain accounts for roughly one of every nine revenue miles driven by truckers this year. But the strike was resolved mid-month and November saw the automotive sector rebound by 12 percent. It is now essentially flat over the past year, in-line with its average annual pace of growth over the past few years. 

Uncertainty dominated headlines in 2019 and, in response, some businesses put investment plans on hold. That uncertainty has begun to recede. Output of business equipment posted its highest Industrial Production reading since March. Developments during the first half of December — after today’s data were collected — point to additional improvements on the horizon. While hardly crystal clear, the outlook for freight demand has become somewhat less cloudy in recent weeks. If finalized, recent trade deals could provide much-needed predictability for businesses with cross-border supply chains.

Although the freight industry remained in a recession through November (as measured by Convoy’s Freight-Weighted Industrial Production Index) we are starting to see many of the headwinds that dragged down freight demand this year start to ease. It would be premature to call November a turning point for the freight industry: The unsmoothed index increased ever so slightly from October, but remains well below it’s year-ago levels and the year-earlier comparables will remain difficult to beat through January. Of course, we will only know for certain once we have seen the index increase for six consecutive months, but it’s clear that freight demand is at the very least stabilizing with potential to the upside as many of 2019’s troubles fade into history.

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Aaron Terrazas

Aaron Terrazas is Director of Economic Research at Convoy where he researches and comments on freight markets and what freight reveals about the broader economy. Prior to joining Convoy, Aaron was a Senior Economist and Director of Economic Research at Zillow. Before that, he was an Economist at the U.S. Treasury Department’s Office of Economic Policy in Washington, D.C. He was educated at Georgetown University and Johns Hopkins University. Aaron has been a runner since age 13 and is a sucker for all endurance sports.
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