Trucking Reports Deliver Bad Sign for GDP

 | Aug 26, 2011 | 11:01 AM EDT
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Tempted as I was to voice some musings on Ben Bernanke's hotly anticipated Jackson Hole speech, I just had to refrain. I am Bernanke'd-out, and I almost long for the days of a more secretive, Greenspan-type Fed.

The dog, a.k.a. the market, has been trained to sit on all fours for Master Bernanke and his 11 FOMC voting minions. Who could blame these warm-blooded creatures? The doggies have been tossed pounds and pounds of raw meat from Master Bernanke, and they're trained to expect an endless supply of the good filet mignon stuff. The Fed's interference in the free market has set market-goers on a course of perpetual stimulus-hunting. In Wall Street parlance, there is no regard for moral hazard.

I did not want to go into the weekend leaving you with a discussion of a hypothetical situation, because that's what QE3 is. Instead, I want to deal in actualities that could be dissected for clues on the immediate future for the economy.

A report from the American Trucking Association (ATA) this week was a great example of an obscure economic report that goes unnoticed amid mouth-watering headlines of Bank of America (BAC) snagging a $5 billion capital infusion from Warren Buffett and Steve Jobs' resignation as Apple's (AAPL) CEO. I have to disagree with those who label the ATA data as second tier; it's far from it, as it provides a glimpse into actual supply and demand in many industries, as opposed to the shenanigans associated with all sorts of government reports.

Developing a sense of how an economic report or series of reports "feels" is a result of 1.) being in lockstep with the market daily and 2.) having next to no personal life. But hey, that's why I am here. The feel of the ATA's reports from March to July reminds me of a souring relationship; it starts off well and then slowly goes downhill amid fighting and a disappearance of trust. In my opinion, the data from March to July indicate more than the "soft patch" we continue to hear about. The reports point to darn near minimal GDP growth rate in third and fourth quarters. Remember, we want trucks full of merchandise being shipped to stores and restaurants, not a trend that resembles the "stall speed" being promoted by Pimco bond managers.

  • In March (the early innings of the relationship), the tonnage index increased 1.7%.

  • In April (still get butterflies in the stomach a month in), tonnage declined 0.3%.

  • In May (doubts starting to surface for varying reasons), tonnage fell 2.3%. An ATA spokesperson notes: "economy definitely hit a soft patch this spring." Odd fact: May's ATA data were reported on June 27, and the S&P 500 peaked on July 7.

  • In June (issues resolved, feeling good, but doubts persist), tonnage increased 2.6%.

  • In July (return of fighting, may not make it much longer), tonnage fell 1.3%. Tonnage has fallen three of the last four months sequentially. Economy growing "very slowly," according to spokesperson.

To provide further context on what ATA brought to the table, note that the Dow Transportation Index did not participate in this dead-cat bounce the markets have enjoyed since the Aug. 9 lows. The not-so-coded message here is that GDP growth estimates for the third and fourth quarter may still be too optimistic, given the demand slowdown that arose in late July and extended into August. The question you as an investor must be ready to ask and then act upon is, when will economic reports be met with stronger buying of risk?

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