Saturday, July 03, 2010

Factory Orders And Logistics Data Diverge On Double-Dip

Right now I'm listening to an NPR broadcast of a mainstream economist from the Economic Cycle Research Institute coming around to an admission that the U.S. economy is creeping into a double-dip recession.  Does data confirm this yet?  Factory orders have fallen off a cliff:

Orders to U.S. factories declined 1.4 percent in May, the biggest drop since March 2009, after eight straight months of gains, the Commerce Department said.

In spite of weaker factory orders, the Cass Freight Index is up both mom and yoy:

The closely watched Cass Freight Index for shipments grew 9.1 percent in June over the previous month, accelerating at a pace that contrasted with other slowing economic signals and reaching a new high for the recovery.

The growth in the freight shipments index came as other key measures, including the Institute of Supply Management’s manufacturing index and the American Trucking Associations’ truck tonnage index, showed weaker activity.

The Cass Freight Index is a statistical sample adjusted to achieve a monthly smoothing effect.  It is best considered alongside other logistics data to get a fuller picture of the economy.  Reconciling this index with gross tonnage figures from the railroad and trucking industries is difficult and requires some intuitive leaps.  The major railroad and trucking associations represent the largest carriers in the economy; their data shows weaker activity among major carriers but may miss smaller carriers covered by Cass' sampling. 

Taken together with other macro data, the Cass report is noteworthy but does not change my mind.  The double-dip is coming.