Will the economic barometer of the frequent thunderstorms by American transportation giants be fulfilled

As a barometer of the economy, the US transportation industry has recently issued warning signals, with the Dow Jones Transportation Index dropping 10% from its high in February. Aviation and logistics companies have warned in their latest financial reports that demand is facing pressure, and behind the fluctuations in consumer spending may be a real turning point in the US economy, with investors increasingly concerned about potential recession.

Transportation Industry Reveals Consumer Fluctuation Signals

The Dow Jones Transportation Index tracks 20 US transportation stocks in industries such as aviation, trucking, shipping, express services, and logistics. Since hitting a high in early February, the index has clearly lagged behind the broader market.

Boris Schlossberg, macro strategist of BK Asset Management, an asset management agency, said in an interview with China Business First that the transportation logistics industry is regarded as the Weather vane of the economy because it has insight into the supply and demand of a wide range of industries. Based on recent manufacturing performance and consumption data from multiple regions, there is indeed pressure to slow down the economic momentum under the influence of the Federal Reserve's interest rate hike.

Aviation stocks performed strongly at the beginning of 2023, but since March, their fatigue has become apparent. American Airlines and Delta Air Lines have fallen by more than 15% in total. The financial report of American Airlines shows that business travel has not yet fully recovered from the downturn of the epidemic, and the collapse of the Silicon Valley Bank has also triggered a significant decline in business travel bookings. Therefore, American Airlines has lowered its profit forecast, stating that if the economy enters a recession, the outlook may face risks. Delta Air Lines reported quarterly losses and said that consumer behavior had changed unpredictably for airlines.

United Airlines CEO Scott Kirby said, "It is clear that the macro risk today is even higher than a few months ago, and our basic situation is still a mild recession or soft landing, which is consistent with what we are currently seeing in the booking. However, we agree that the tail end risk is higher than normal

The Weather vane of the freight market, J.B. Hunt, a truck transportation and logistics company, also saw a larger than expected decline in profits and revenues in the latest quarter. Shelley Simpson, the president of the company, said that he was facing a "freight recession". He said on the conference call: "We are in a challenging freight environment. For an industry that continues to face inflationary cost pressure, there is deflationary pressure on transport prices."

The financial report released by logistics giant UPS this week was also dismal, with first quarter revenue declining by 6% and earnings per share decreasing by 27% year-on-year. UPS stated that due to high inflation suppressing disposable expenses, the peak of online sales during the pandemic began to subside, and the slowdown in the US retail industry led to lower than expected transportation volume, with most express delivery companies facing the problem of excess delivery capacity.

It is worth noting that according to the statistics of the Transportation in the United States, since the 1980s, the inflection point of the transportation industry has been four to five months ahead of the overall economy on average, so the U.S. economy may be in danger.

Schlossberg told First Financial that the view that the Dow Jones Transportation Index predicts economic trajectory has a long history. One of the fundamental principles of Dow Jones market analysis theory is that the Transportation Index and Dow must