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Recession Looms: Cass Freight Index Negative for 7th Month

July 16, 2019

Recession Looms: Cass Freight Index Negative for 7th Month

According to Cass, “Freight shipments signal economic contraction”.

The Economic Outlook from Freight’s Perspective is not promising.

  • With the -5.3% drop in June following the -6.0% drop in May, we repeat our message from last month: the shipments index has gone from “warning of a potential slowdown” to “signaling an economic contraction.”
  • May and June’s drops are significant enough to pose the question, “Will the Q2 ’19 GDP be negative?”
  • We acknowledge that all of these negative percentages are against extremely tough comparisons; and the Cass Shipments Index has gone negative before without being followed by a negative GDP.
  • The weakness in spot market pricing for many transportation services, especially trucking, is consistent with the negative Cass Shipments Index and, along with airfreight and railroad volume data, strengthens our concerns about the economy and the risk of ongoing trade policy disputes. Weakness in commodity prices and the decline in interest rates have joined the chorus of signals calling for an economic contraction.
  • We are concerned about the severe declines in international airfreight volumes (especially in Asia) and the ongoing swoon in railroad volumes, especially in auto and building materials.
  • We see the weakness in spot market pricing for transportation services, especially in trucking, as consistent with and a confirmation of the negative trend in the Cass Shipments Index.
  • As volumes of chemical shipments have lost momentum, our concerns of the global slowdown spreading to the U.S., and the trade dispute reaching a ‘point of no return’ from an economic perspective, grow.

European Airfreight

European airfreight volumes have been negative since March 2018, but only by a small single-digit margins (-1% to -3%), until November 2018. Unfortunately, since then, volumes have started to further deteriorate. Our European Airfreight Index was down a concerning -7.2% in April, only down -2.6% in May, before dropping -7.9% in June. Although by itself distressing, it’s the Asian data that has become the most alarming.

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