Rail Shipment Indicator: Manufacturing and the Tangible Economy

There is another leading indicator, called "Baltic Dry Index". Cargo ships that do not move make zero$, so in a recession their rates drop a lot, and they are a leading indicator of international trade.

So it is a very good leading indicator

http://www.wikinvest.com/stock/Baltic_Dry_Index_-_BDI_%28BALDRY%29?gclid=CJu_ydeEk6YCFUS8Kgod-RKgoA

http://www.slate.com/id/2090303/

Thanks aurizon. Milo

I have not done a real study, but I have known for some time that a really good indicator of future economic economy can be gleaned from the number of vessels waiting to transit the Panama Canal, something that is rather easy for me personally to monitor. Recently, the number has been very high. Goods/materials are moving in the international marketplace. About a month before the last crash, the anchorage was nearly deserted...

This is the rail version of what you are seeing outside your window, cwarner. Only finer tuned for US. Thanks for your contribution.

Milo

this is all very postive info Milo, Aurizon, and CW! thank you!

Why would such a courteous response be considered off topic?

This fits in with what it means to be a professional.

Thanks Chris, for showing such consideration.

I put it OT myself and have mysteriously gained 2... an even bigger puzzle...

but hey, when you are this good looking, people just can't help themselves!

Oh well, as Milo would agree, there are a lot of non professionals on here.

I'm impressed at the utility of the Railcar, Baltic and Panama indices. We all understand that no single index will be a perfect measure of the complex organism of the economy.

One index recently brought to my attention was Post Office parcel traffic. My Post Office contact assured me that Ebay seller packages are a huge and growing proportion of their business. She also noted her private observation that an awfully large part of that traffic was of Made In China goods. So, I would guess that Post Office parcel traffic may have value as an index of non-manufacturing-related economic activity. Non-USA-manufacturing to be specific.

Mark Bingham
Relativity PL

I like Milo's logic for rail shipments being an indicator of US manufacturing growth. As an engineer in US manufacturing I'm encouraged. Here's to the 2010 increase being a long term trend and not a reflection of the severely reduced inventories from the previous 2 years!

Here's a link to an article that is only slightly related but gives reasons why some manufacturing company stocks are doing better than their US job growth indicates.

http://www.charlotteobserver.com/2010/12/29/1940287/us-firms-create-jobs-but-many.html

Nice article. Thanks for contributing.

Milo

Great stuff! Stock and real estate prices, Consumer Confidence Index, etc. measure how people 'feel' about the economy. The Baltic Dry Index, Rail Traffic, and 'Panama' index measure what they are actually doing. By most accounts the world economy has recovered and is growing briskly. It is mostly the developed world that is lagging, and that is largely due to their higher production costs.

These indices tell us about the volume of trade, and this is very useful information. But unless we know what's in those ships and railcars we don't know much about the 'direction' of the trade. If these shipments are mostly imported goods then an increase in volume is bad news. Bad news in that people still don't understand what a mess we are in, and are spending money they may not really have. The link below seems to indicate that this is the case.

http://www.bea.gov/newsreleases/international/transactions/trans_glance.htm

But I certainly don't mean to rain on this parade. Thanks, Milo, for bringing up this important point. Economic illiteracy is a real problem for people lucky enough to live in a democracy, and who therefore have an important role in shaping economic policy. IMHO we place far to much emphasis on interest rates, stock prices, tax rates, and consumer attitudes when we think about the economy, and far too little on the tangible stuff that economies are made of.

I do some work for Petrobras, some other Brasilian firms, and have done some for companies in Peru, Argentina, Venezuela, and Columbia.

I am amazed at the roaring economies in South America, especially Brasil, Chile, and Peru.

And, the wage gap is rapidly following by the way side with a middle class coming on strongly.

Petrobras has grown to be the 4th largest Oil Power in the world, and will soon advance beyond that.

And then we have the news out of China.

Becoming a consumer society and less of an exporting society.

Sovereign wealth is a dangerous thing. When the people that have the money also have the guns...

Thanks for your sensemaking.

Milo

Thanks for suggesting that I make sense - although my wife assures me that this is not the case. I'm inclined to agree with her because I am constantly finding contradictions in what I think. So at this point I'm hoping that I can at least try to frame issues in terms of what is actually going on, as opposed to trying to approach them from an ideological viewpoint. As you say 'Sovereign wealth is a dangerous thing. When the people that have the money also have the guns...'. Unfortunately it seems that they (with the money AND guns) are beating us up pretty well. We're like two geese fighting over the best breeding spot by the pond, unaware that there's a leopard watching and hiding in the reeds.

Some folks make the argument that 'the Constitution is not a suicide pact'. I am beginning to suspect that the same is true of our form of Capitalism. I'm not smart enough to see a solution, but I do hope we can look at this honestly, and with a minimum of ideological baggage. If our current situation teaches us anything it is that those on the left and the right are silly geese. Survival may depend on our willingness to develop better rules governing the squabbles amongst ourselves so that we have enough presence of mind to keep one eye on the killer in the bushes.

a person with no contradictions isn't human.

Yes, I agree also and your following statement seems to have held true for all of Europe pre Thatcher, or at least England, and it's woes along with others seem to have increased as the state models were dismantled.

"It's as if the rest of the world is moving towards an economic model that is Capitalist on the outside and Nationalist on the inside. In the old days we called this Mercantilism. I think there is a lesson to be learned in this".

Hum, that is a lot to think about.

Brasil, for one has a decent representation of agencies and factories for most of the multi nationals, but still gets a lot manufactured in the USA and Germany for import of large capital projects.

Since all things seem to evolve, maybe it is time for a new model or a hybrid.

And, I have learned to use the Portuguese/Brasilian spelling with ans instead of a z.

My spell checker found the spelling issue right away.

As you say, 'all things seem to evolve'. Sometimes it seems to me that our current situation is like basic biology writ large: you start with one mushroom, it matures and drops its spores, and next year a ring of new mushrooms appears. Over time the ring spreads outward, but never inward because the nutrients in the old center have been used up. Europe and the US were the 'early adopters' of the industrial revolution, and were richly rewarded. But now the spores are spreading, and we've used up most of the nutrients (cheap labor and raw materials).

Perhaps fortunately, the world is a finite place, and the spores travel rapidly. If the human race is still around in a few generations this process will have run its course, and the wage/cost of living differential that is killing us now will not be such an economic disadvantage. This is hunker down nose-to-the-grindstone time for us, and with hard work we should come out of this fine. But then again, every time I hear some politician go off about 'fixing the economy' by going back to the 'old way of doing things', or cutting taxes, and then after several minutes I realize he (or she) hasn't even mentioned the importance of education, I begin to lose hope. We are facing very serious problems, but we are not doomed by fate. However, we may well screw ourselves if we persist in our 'Beavis and Butthead' (Laurel and Hardy for you older folks) self destructive comedy routine.

johnfotl-

I appreciate your mushroom model, but would like to point out that, historically, once a society "falls from grace" (Sumer, the Persian Empire, the Ancient Greeks, Alexander's Empire, the Romans, the Ghengis Kahn Empire, the Aztecs, the Mayans, the Khmer, the Dutch, the British, and on and on), they never seem to evolve to a higher level, but fall prey to outsiders and settle for subservient rolls. It would appear that we have run out of "outsiders" to ride in from over the horizon and conquer our societies, so maybe this old model is fading because all of us have been conquered at one time or another...

Your historical note is spot on, and the odds against any kind of American (as in US) or European renaissance are very, very long. But it's not impossible - just highly improbable. There is so much inertia in the system that we have been able to 'live off the fat' for a generation or so now. That same inertia is what makes it unlikely that we can do what other fading civilizations have been unable to do - get a second shot. I'm not much of a historian but it does seem to me that a big factor is that these cultures turned inwards, and then turned against themselves, arguing about a return to a 'simpler time' when things were (at least in memory) better. The short term benefits (looting the corpse) are hard to resist. But foolishly I prefer some level of optimism.

Gack in 1988, Joseph Tainter (also there is a Wikipedia article that summarizes his work) published "The Collapse of Complex Societies" in which he traces the collapse of such societies as the Maya and the Romans to the fact that the societies become so complex in their organization that they cannot respond to crises. Warning- much of what he says will scare you, when you compare his theories to the current situation...

Yes this is a very scary and dismal situation, and it will almost inevitably get worse. But there are a few differences between these ancient cultures and our modern one that offer some hope. Bureaucracies are still expensive, inefficient, self-perpetuating, and stifle the transfer of information, but now days there are alternate routes (media and internet) for passing information and we are not so dependent on 'official' versions of the facts (of course there is a downside to this - freelance disinformation). And while bureaucracy is probably increasing in the public sector, the private sector seems to be at least trying to thin out middle management. But this is small potato stuff. Things are going to get worse, and then worser. I think we agree on that.

My concern is that I don't hear this being discussed much. People still talk about 'recession' and 'recovery', and use the language of cyclical downturns as if this was a garden variety slump. People need to understand that there will be no light at the end of this tunnel unless we build one. This is not a slump - this is a massive shift in the global economic center of gravity. In particular I don't hear the political establishment, media, or business leaders talking about it. The longer this silence lasts the deeper the hole we dig, and the more inevitable it all becomes. So perhaps Tainter is right, but I don't think we should give up so easily. My candidates for the light at the end of the tunnel: (1) Fix our wretched education system so that we stop wasting so much human capital. (2) Replace imported energy with nuclear, solar, wind, geothermal, (hopefully fusion someday soon), and conservation. (3) Repair our basic infrastructure. (4) End the subsidies and policies that make the 'tangible economy' subservient to Wall Street.

.... mandate that 30% of all taxes paid goes directly to paying down the debt, and cut most of the rest pork fat and ALL military spending that is non-salary. This plan would zero the debt in 5 years.... now you got something to build on.

I haven't read Tainter's work, but it has been mentioned a few times here, and seems to be salient. Bureaucracy may support a few virtues, such as good recordkeeping, but it is also at risk of becoming rigid and stifling. Medieval China had some good observations and technologies, but became overshadowed by a more vibrant West (at the time). Have the roles become reversed lately?

Where's John Galt when you need him?

John is working as an oilman on the New York subway system- I'm not sure which section...