Summary
An inventory build-up is likely with search trends for shipping far exceeding those of consumer spending and capital expenditures. We expect the transportation industry to offer sub-par returns through year-end.
Comment
Google search trends concerning shipping and transportation continue to grow across the globe away from rail. Cargo trucking, freight, and maritime searches all show positive six-month changes.
We view Google search trends as leading indicators to actual economic activity. For example, the vast majority of us begin the hunt for a new appliance or piece of furniture by ‘Googling’ for specs, reviews, pricing, and much more. We have found the collection of search terms entered by consumers and businesses telegraph economic growth or weakness to come.
Similar search trends encompassing capital expenditures have seen another wave of growth cresting into the fall of 2018. Building materials, cargo trucks, construction tools, and even heavy machinery are likely seeing interest crescendo.
On the flip side, search trends for consumer goods like apparel, autos, home improvement, and appliances have already greatly slowed after running at a frenetic rate throughout 2017 and early 2018. The outlook for consumer spending is not souring, simply plateauing.
The next chart shows the spread of Google search trends for shipping (first chart above) versus consumer spending (second chart above) and capital expenditures (third chart above). This spread indicating whether or not production is exceeding demand has led U.S. business inventories (orange line, right axis).
We fear inventories will not roll over and remain stable or grow in the months to come. Shipping trends are now far exceeding consumer demand and capital expenditures.
The S&P 1500 transportation index’s relative return to the S&P 1500 (yellow line) has often been led by shifts in shipping-related Google search trends (blue line). A continued deceleration would remove transportation’s recent out-performance.
The last set of charts offer three-month forecasts for the air-freight, trucking, and maritime transportation industries using these Google search trends. Air freight is poised to outperform, while trucking and maritime grind sideways through year-end.
