Transit Indicators Positive for Retail, Industrial Sectors

Trucking is as a barometer of the U.S. economy, since it tracks the movement of manufactured and retail goods–which move in response to demand. All together, the trucking industry represents nearly 70 percent of tonnage carried by all modes of U.S. freight transportation. Persistently strong trucking also means that conditions are positive for industrial real estate, which handles volumes of shipped goods; and retail real estate, the end recipient of much of the shipping. Monthly fluctuations by themselves might not mean that much, but a run of strong numbers is good.

The American Trucking Association said on Friday that its For-Hire Truck Tonnage Index increased 1.1 percent in March, following a revised drop of 2.8 percent during the previous month, which (being adjusted for the season) was considered another one of the Q1 warnings that the economy might be slowing down. Compared with March 2014, the index increased 5 percent, which was above the relatively weak 3.3 percent annual gain in February but below January’s 6.7 percent year-over-year increase. So while March is a more optimistic number for the industry, its long-term movement is still uncertain.

Another transportation metric that points to the direction of the economy (though more broadly) is the U.S. Department of Transportation’s estimates of travel on all roads and streets. As the economy expanded in the decades following World War II, that metric exhibited a steady increase, with a few temporary dips for the recessions before 2008. As suburbs expanded, and more people owned and drove cars, miles driven increased. But the increase stopped in 2008, partly because of the very high gas prices that year, but also because of the recession. Oddly enough, during the recovery years after 2008, the number of miles driven has barely increased at all–the postwar pattern of increase seemed to be over.

On Friday, Transporation reported that travel on all roads and streets was up by 2.8 percent (6.1 billion vehicle miles) for February 2015, compared with the same month a year earlier. That’s probably a positive for the economy, but even so the number of miles driven has only now returned to 2007 levels, and that seems to be because the price of gas happens to be low this year.

What does it mean that Americans, despite population growth and strong car sales, aren’t driving more than they used to? Part of the answer is demographics: as Baby Boomers age, they drive less. But Millennials are also driving less, which is a genuine change among the younger generation. Whether that’s because they have less money or less inclination to drive is still an open question, but if the Millennial generation stays reluctant to drive, it will (broadly speaking) benefit real estate close to other forms of transit, and hurt properties accessible only by car.