Do Supply Chain Links Indicate a Recession?

I hate the misuse of the word recession. The definition for an economic recession is two consecutive negative economic growth quarters.

This has clearly not happened! That doesn't mean that it can't, but there has been a mass of news articles stating that the US is and has been in an economic recession. That is outright false reporting by individuals that should know better and it seems that those authors are counting on the reader's ignorance to perpetrate it.

Whether the supply chain can be used as an indicator for a pending recession is another thing that is worthy of debate.

As to whether we are headed for a recession or not, one thing we can do is to accurately report the issues and not attempt to spread fear and gloom by falsely creating a sense that we are doomed.

That kind of attitude does nothing to solve the real issues and since it appears that it is being done by design you have to wonder for what reason reporters and editors would be cheering on an economic downturn.

Absolutely not!

The demand for items and transporting of items is much more complex and by no means an indicator of a recession. Good business will keep all its manufacturing and resources close together. It will only go outside its region if a cheaper supply is found. Then it may consider moving its base of operations. Purchasers are always looking for cheaper sources of products. The trend lately is to buy locally as much as possible due to the high cost of trucking and fuel. Any downturn in trucking may only indicate the increase in capability of sources to produce and deliver locally. It may indicate a decrease in demand but unless you know all the factors, it is only conjecture.

Generally the demand for items is dependant on the size of the population, and their ability to pay.

A decrease in importing may indicate a cheaper source inside the country, or a decrease in demand. (opposite indications for recession. A cheaper source inside the country does not mean the demand has weakened)

A recession is the result of a decrease in demand and the ability or desire to purchase. A false recession may be a result of major changes to the global market. I call it a false recession because your demand and supply may not change, however, the value of your dollar is changing on the world market.

After the cold war, Russia joined the global economy. As a result they had super inflation and the rest of the global economy had a (false) recession for a decade until the two large markets somewhat equalized. Now we have India and China going through an economic boon. I expect a global (false) recession due to the adjustments of the exchange rates. The fact is that the demand is also increasing exponentially and wise companies will take advantage of the increased demand.

So your best indicator of a true recession is the jobless rate combined with your total production and sales of all business within your country.

Then there is the other false recession caused by someone saying there is going to be a recession. This causes panic in the stock market and becomes a self fulfilling prophecy

I don't think we can look at the trucking and or logistics industry to determine if there is a recession on its way or already here. A recession is defined as 2 quarters of negative growth which the numbers have shown we are not in one. But IMO the numbers and people reporting them to us are lying. We constantly change the way we measure things, for example M3 money supply was the leading indicator of inflation for decades but since those #'s look bad they choose not to report it anymore. According to CPI we have roughly 4% inflation, but people who still measure M3 estimate it to be around 12-14%. But we have the Core Rate of Inflation, I don't know anyone who lives by the core rate, it doesn't even include energy or food cost increases.

The best indicator of whether we are in a recession now or will be in the near future will be the job #'s.

The slowdown in trucking is more a result of the increase in gasoline price than it is representative of the economic slowdown we are experiencing (though I'm sure the slowdown is playing a role). Railroads, which use much less fuel, have been booming lately.

http://www.usnews.com/articles/business/economy/2008/03/24/railroad-stocks-the-little-sector-that-could.html

AH makes a good point that we can't say we are in a recession until we've experienced two quarters of negative growth, but still, if I could go forward 6 months in time I'm fairly certain that this would be in recession. The problem is credit. The US economy has been driven by the consumer for a decade and the consumer has been driven by credit. Now that credit is tightening (dramatically), the consumer will be circling the wagons as well, which will hurt growth. Bad times.

Interesting take, Roger. We will have to wait and see what unfolds for next few quarters, but your point makes sense.

Well, if you listen to the news, we are in one and have been for months. I think half of the problem is the media itself blowing things out of proportion. All you hear is gloom and doom about the economy, perpetuating fear, people start hoarding their money and getting rid of stocks/bonds, etc... Most of it seems to be because of the housing and banking industry and all I've got to say to that is they have done it to themselves. Too many people getting fat for too long and now it's time to pay the fiddler. Housing with it's profits (developers) and all the fat cats in banking that made it too easy for loans to support the developers. On top of that, making it too easy to get bankruptcy (instead of holding people responsible for their own actions). It's come full circle and bit them in the end. pun intended. The original question, no, I don't think the supply chain links indicate a recession at the moment but I think it can and will change in the not too distant future. As much as it shouldn't come in to play, the upcoming elections will have a bearing on the issue.