The predictive power of an experimental transportation output index

Abstract

A monthly output index for the US Transportation sector over January 1979-June 2003 is reported covering air, rail, water, truck, transit and pipeline activities. Separate indexes for freight and passenger are also constructed. The strong cyclical movements observed in the transportation output appear to be well synchronized with the NBER-defined recessions and growth slowdowns of the US economy. The series reflects the profound impact of 9/11 on the transportation sector, especially on the airlines. By December 2002 it has reached its historical peak. Given the observed relationship of the transportation output with the economy, the recent upward trend in the freight transportation strongly suggests that both the sector and the overall economy have recovered from their latest slump.

Transportation and the Economy: Linkages at Business-Cycle Frequencies

“…Comparisons of the lead-lag relationship of the transportation reference cycle in this study and transportation output index reported by Lahiri and Yao relative to the NBER reference cycle of the aggregate economy suggest important differences between the two (8). The TSI leads the economic reference cycle by almost 16 months at peaks and is roughly coincident at troughs, but with two extra turns that correspond to stand-alone economic slowdowns of 1984 -1985 and 1995-1996. The TSI is more synchronized with growth cycles than the full-fledged business cycles of the aggregate economy.…”

“…This transportation services index (TSI) uses eight series on freight and passenger movements from the airline, rail, waterborne, trucking, transit, and pipeline industries [North American Industrial Classification System (NAICS) Codes 481-486] covering about 90% of total for-hire transportation during the 1980 to 2000 period. Lahiri and Yao record the business-cycle characteristics of TSI in monitoring the current state of the aggregate economy; they find that it leads at peaks but is almost coincident at troughs of economywide business cycles (8 ). Lahiri and Yao further explain these features through TSI's central role in inventory cycles and industrial production in a stage of fabrication model (9).…”

Should transportation output be included as part of the coincident indicators system?

“…The first phase corresponds to a slowdown and the second corresponds to a real recession. This newly observed feature has made TSI even more useful in dating peaks and troughs in a timely fashion because the onset of the slowdowns and the start of economic recovery are all well captured by TSI (Lahiri and Yao, 2004b). A similar characteristic is also found in IP and Sales.…”

Should Transportation Output Be Included as Part of the Coincident Indicators System?

“…TSI is a chained Fisher-ideal index, and is methodologically similar to the Industrial Production (IP) index, see Lahiri et al (2004aLahiri et al ( , 2006 for details. 4 Lahiri and Yao (2004b) also find that the strong cyclical movements observed in the TSI appear to be well synchronized with the NBER-defined recessions and growth slowdowns of the U.S. economy. TSI can give early signals to the onset of economic recessions while being contemporaneous to economic recoveries.…”