Recession Warning: Freight Volumes Negative YoY for 11th Straight Month

The Cass Freight Index once again warns again of economic contraction.


That's just one one month away.

Six Key Points

  1. With the –5.9% decline in October, following the string of declines in May through September (ranging from -3.0% to -6.0%), we repeat our message from the previous five months: the shipments index has gone from “warning of a potential slowdown” to “signaling an economic contraction.”
  2. We acknowledge that: all of these negative percentages were against tough comparisons (some extremely tough), and the Cass Shipments Index has gone negative before without being followed by a negative GDP. However, demand is weaker across almost all modes of transportation, both domestically and internationally.
  3. Several key modes, and key segments of modes, are suffering material increases in the rates of decline, signaling the contraction is getting worse********.**
  4. We know that freight flows are a leading indicator, so by definition there is a lag between what they are predicting and when the outcome is reported. Nevertheless, we see a growing risk that GDP will go negative by year’s end.
  5. The weakness in spot market pricing for many transportation services, especially trucking, along with recent airfreight and railroad volume trends, heightens our concerns about the economy. Weakness in commodity prices, and the ongoing decline in interest rates, have all joined the chorus of signals calling for an economic contraction.
  6. The Index on a 2-year percentage change basis went negative (-0.1%). This suggests that the great surge of 2018, or ‘Trump bump’ as it was characterized by many, has now been completely erased at least from a freight flow perspective, as measured by the volume of freight bills paid by Cass.

Storm Clouds

  • With China, the world’s second largest economy (even though the latest headlines and tweets keep suggesting there will be a resolution). Tariffs have throttled export volumes in many areas of the U.S. economy, most notably agriculture exports and other select raw materials. We maintain hope that there will be a resolution; that there will be a trade deal because both China and the U.S. have to reach one. But the Asian airfreight volumes continue to suggest a growing risk that one or more of the Asian economies (China, South Korea, Singapore) is already sliding into recession. The current civil unrest in Hong Kong only increases the risk of an economic contraction and is consistent with the popular reaction of citizens who are more challenged/not as prosperous as is commonly believed.
  • With Mexico. The threat of tariffs, and then the recension, sent shock waves through many supply chains. Border transit times going Northbound and Southbound have gone from less than 30 minutes to more than two days in some cases. Even before the tweets about tariffs, border inspections had become increasingly more stringent. Mexico is our third biggest trading partner, and over 80% of their exports are to the U.S. Disruptions in trade between our countries are harmful to our economy and capable of producing a recession in Mexico. Risk has gotten worse.
  • Autos and Housing: Consistent with disappointing housing starts (down -1.3% YTD) and lackluster auto sales (down as much as -4.8% in April and -1.6% YTD), spot pricing in transportation has declined dramatically. Especially in trucking, spot pricing has reached levels below contract that will drive weakness in contract pricing and eliminate, or at least significantly reduce, all capital investment other than maintenance cap ex. This puts further downward pressure on growth in coming periods.


Eurozone Airfreight

"Airfreight volumes in Europe continue to suggest that the region’s economy continues to cool."

Asia Pacific

Airfreight volumes in Asia suggest that the region is on the verge of, or is already entering, a recession. As we’ve highlighted before, when trade tariffs slow the rate of growth for our global trading partners, it poses a real threat to the U.S. rate of economic growth."


"The inbound volumes for Shanghai plummeted and then stayed weak. This concerns us since it is the inbound shipment of high value/low density parts and pieces that are assembled into the high-value tech devices that are shipped to the rest of the world. Hence, in markets such as Shanghai, the inbound volumes predict the outbound volumes and the strength of the high-tech manufacturing economy."

Cass Shipments vs GDP

"At first glance, the GDP for the 1st through 3rd quarter seems very inconsistent with overall freight volumes. Using the Cass Shipments Index as a predictive proxy, we did not expect the GDP to be as strong as the reported 3.1% in Q1, or 2.0% in Q2, or even 1.9% in Q3. As we have already explained, dissecting the contributing factors explains much of the disparity, and should point out that freight flows are a leading indicator. It often takes two to three quarters for the trends in freight to become reported economic statistics."

"Based on the trend since the beginning of the year, but especially the data over the last six months, the Cass Shipments Index continues to signal that the economy is beginning to contract and that the GDP could go negative, or at least come close to being negative, in Q4’19 and or Q1’20."

Cass vs Jerome Powell's Bernanke Moment (Just Today)

Jerome Powell may have had his "Bernanke Moment" today in Congress.

Powell told Congress "Day of Reckoning" Far Off and "there’s nothing that’s really booming now that would want to bust."

Uh... What about the stock market?

Powell's testimony today sounds exactly like Bernanke's proclamation to Congress right before the Great Recession, "there is no national housing bubble to bust."

Recession Signals

In case you missed it, that is two recession signals today, one from Cass and one from Powell.

Here is a third: Good Reason to Expect Recession: Greenspan Doesn't

Meanwhile, please note, 4th-Quarter GDP Forecasts Off To Weak Start.

Mike "Mish" Shedlock

Comments (18)
No. 1-11


I am looking for Bernanke's precise quote. It went something like this: "Frankly, I take exception to your question. I do not believe there is a national housing bubble to burst"


There wasn't a recession in 2015 or 2016 when Cass went negative nearly for 18 months. There was just meager growth and a slowdown in job growth. This is part of what pushed Trump into office IMO. People just weren't feeling well economically. Only time will tell but we must admit slow growth is possible.


Feb 15 2006



I wonder how much freight is moving in small boxes (i.e. amazon), rather than in truckloads being shipped to distributors and retailers? No doubt some, but is it significant?



"There wasn't a recession in 2015 or 2016 when Cass went negative nearly for 18 months."

Yes, but critically Cass did not call for one either!

And It did catch the boom when the slump ended.



Found It - Thanks to Bernie Sanders



That is much more damning than a simple "We’ve never had a decline in house prices on a nationwide basis."


I sense desperation from Mish. He wants a recession so badly, everything he looks at screams “recession” to him. While anything is possible, I still expect slowing growth going forward. A 1% average for the next decade, followed by zero growth on average after that.

A question for you Mish; assuming you are correct, and a recession hits, at what point would you sell your gold and treasuries and reinvest in other areas?



I am not "desperate" for anything. What a joke

If and when I think gold is fully valued I will sell, but I do not have price targets.


We can quibble about timing, but aren't we essentially seeing the end of debt led growth that started post the 2008 recession? Global demographics are mostly pointing in a downwards direction, there is only so much debt a person, corporation or country can sustain, so aren't we witnessing the inevitable reversion to the mean? What money has been created is finding a home in financial assets as it can't find productive 'real' investments anymore.

I think the most telling indictment of the world economy is stagnating or dropping oil prices despite the recent attacks on Saudi oil infrastructure. If that couldn't put a rocket (pardon the pun!) underneath oil prices, nothing can.


I've recently come across some very astute articles about just how much China was responsible for pulling the world so swiftly upward from the bout of debt deflation in 2008-09.

Essentially China's massive multiyear spending spree, which probably dipped heavily into their well of foreign currency reserves, prevented the storm of deflation from purging the dead wood from the world economies. This has prevented the destruction of many zombie corporations and organizations.

But over the past 6 months or more, China has shown themselves unwilling or unable to continue such aggressive fiscal spending. The subsequent drop in worldwide demand is the main component behind the sudden fall in many leading indicators we're seeing—especially the CEO survey, the number of CEOs jumping ship, and the freight indices.

The US economy and the world in general is a lot like the bus in the film Speed, as someone here recently pointed out: if the bus slows down, the debt bomb explodes!

In my opinion, a painful period of debt deflation is not only inevitable, but also imminent. I expect it to start by mid-2020, if it hasn't already.

The canaries in the coal mine have stopped chirping. Instead they're croaking in alarming numbers!


I don’t get it…the bulls are saying that the U.S. consumer, who accounts for two-thirds/70% of GDP is doing the heavy lifting, and more than counterbalances the decline in manufacturing and related transportation (re Cass) and commodity industries which account for some 20% of GDP.

Of course the government data supports this belief.

Yet if we look at non-government data, as it relates to major consumer discretionary items, e.g. auto/trucks, motorcycles (Harley Davidson reports), recreational vehicles (RVIA data), boats/yachts (NMMA data), sales and shipments are decreasing this year.

At least a significant part of these consumption decreases should be reflected in government data, but it’s not.

What’s going on?