If Trucks Aren’t Carrying Anything, Who’s Buying Anything?

Several times we have commented on the transportation names, both for their own investment merits and as an indicator of overall economic activity. Since anything sold from any store is transported there by truck, a slowdown in trucking means stores are seeing no need to stock up. Barry Ritholtz makes that point when discussing the latest American Trucking Association tonnage data at The Big Picture | Truck Tonnage Plummets:

November 2006 marked the single worst month for for-hire truck tonnage since the last recession,” said ATA Chief Economist Bob Costello. “Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8 percent contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.”

Naturally, a tonnage slowdown is bad news for truckers. Investors who are into the relative game, can play the non-asset based names like Landstar (LSTR - Annual Report) and CH Robinson (CHRW - Annual Report). Those who simply prefer positive absolute returns may want to steer clear of the whole group.

Disclosure: Author holds put options on FedEx (FDX - Annual Report) and Union Pacific (UNP) and is short put options on Landstar (LSTR - Annual Report).

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Topics: Arkansas Best (ABFS), CH Robinson Worldwide (CHRW), FedEx (FDX), Landstar Systems (LSTR), Stock Market, Union Pacific (UNP), United Parcel Service (UPS), YRC Worldwide (YRCW) | RSS

3 Comments on “If Trucks Aren’t Carrying Anything, Who’s Buying Anything?”

  1. [...] With indications of a consumer spending slowdown building, hopes for real GDP growing at 2.5% must anticipate a fairly significant contribution from business spending (since the consumer accounts for roughly two thirds of the economy.) However, the latest poll of Chief Information Officers (CIOs) by CIO Magazine does not paint a particularly rosy picture. In fact, the only thread on which the bulls can cling is that CIO sentiment is frequently more of a lagging than a leading indicator of tech spending. As evidence, consider this quote from the poll findings: In the December Poll, panelists project IT budgets will grow by 5.8% over the next 12 months, down from 6.5% in the September poll. In addition, CIOs report that IT budgets increased by an average of 5.8% over the last 12 months, up from 5.0% last quarter. [...]

  2. Take the good times with the bad, trucking isnt just going to disappear

  3. [...] Price increases in corregated boxes had previously been at odds with bad news from trucking companies. Now it looks like box prices may be rolling over. [...]

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