The Phaserl


Transportation Sector Woes Continue

by Pater Tenebrarum,

Not Getting Better

In late July last year, not long before the stock market delivered a major “warning shot” with its sharp decline in August, we wrote about the transportation sector in Transportation Sector in Trouble – What are the Implications?. As we noted at the time, the sector seemed to send a potential “economic red alert”.

What was at the time a long-lasting divergence between the Dow Jones Industrial and Transportation Averages, has in the meantime turned into a complete rout of transportation stocks. At the moment the Transportation Average is rebounding from severe oversold conditions, but the fact remains that this former upside leader has become a downside leader. In recent days we have come across a few other data points and charts in this context, some of which we show below. Yesterday Zerohedge reported on a sharp decline in orders for trucks, which jibes with what we are seeing elsewhere.

The charts below are a bit of an eclectic collection, but they are all making the same point: global trade continues to be in trouble. First two charts from China, the first one of which we have already shown in a recent Bill Bonner missive, namely the Shanghai containerized freight index (a price index).

The next chart shows the China railway freight index. Apparently China’s national railway company is set to reports its first ever operating loss this year, as railway cargo volumes have collapsed 11.9% year-on-year in 2015 to a new five year low. In Q4 2015 the decline accelerated to 13.4% y/y.

In the US, transportation-related data obviously don’t look quite as dire as of yet, but the trends are clearly nothing to write home about. Late last year the y/y change in truck tonnage finally turned negative after slowing down all year long from a late 2014 peak.

The CAS freight index of shipments has showed negative growth for quite a while already – and although the pace of the decline has slowed a bit lately, the y/y change rate remains in negative territory. A brief period of positive readings in 2014 has been replaced by another bout of weakness throughout last year. Note that for the first time in the “recovery”, the CAS freight index has failed to deliver even a single positive growth reading in 2015.


An Incredible Collapse

However, the by far most stunning data points continue to be delivered by the Baltic Dry Index (BDI), which has been utterly annihilated. This index shows the cost of dry bulk shipping and once reached the lofty level of 11,793 points in 2008 – in concert with the peak in oil prices. Today it stands at a mere 303 points (not a typo), down 97.5% (!).

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