USA’s Transportation & Warehousing Sector contribution to Gross Domestic Product increased to $543bn in 2015, a rise of 112% from 1997
The Great Recession officially lasted for 6 quarters from the end of 2007 Q4 to 2009 Q2. Over that period Real Gross Domestic Product (RGDP) decreased by 4.3% and $634bn was wiped from the US economy in 18 months. 8 million people lost their jobs. My interest in the US Transportation & Warehousing Sector stems from my research into the 2008 Great Recession, which officially started at the end of 2007 Q4 and ended in 2009 Q2.
The Bureau of Economic Analysis (BEA) calculates and provides data on Gross Domestic Product by industry sector and by state, and does so by quarter. When I was analyzing the 2008 Recession by state across 20 industry sectors, I noticed that the Transportation & Warehousing Sector (Industry Id 36) was the only sector of 20 that declined in every state during the 2008 Great Recession.
The Transportation & Warehousing Sector is very sensitive and reactive to changes in economic activity and an excellent bell-weather measure on the health of the economy. But as we’ll see from the sectorial analysis below there are wide variations in the performance of both the sub-sectors and the geographical locations, so those participating in the sector could benefit from more detailed analysis of the data down to state level, which is provided elsewhere on this site.
DATA MODEL
Use of GDP Data as opposed to RGDP
For the purposes of this analysis I have used Gross Domestic Product (GDP) [BEA Component Id 200] data as opposed to Real Gross Domestic Product (RGDP) [BEA Component Id 900]. The difference between the GDP and RGDP is that the latter is the former adjusted for inflation.
3 Distinct Time Periods
It is also best to analyze the 1997 to 2015 period by breaking it down into 3 distinct periods:
- PRE-RECESSION: 1997 to 2007. This was the period prior to the Great Recession;
- GREAT RECESSION: 2008 to 2009.The economy had started to recover in the second half of 2009 and a more precise measure of the impact of the Great Recession can be gleaned from the quarterly data. The analysis in this post is based on the annual figures;
- POST-RECESSION: 2010 to 2015.The recovery period after the end of the Great Recession.
These periods vary in length. The pre-recession period is 10 years long, the great recession period is 2 years and the post-recession period is 6 years in length. To clarify the growth within those periods I have calculated what is called the Compound Annual Growth Rate (CAGR). This is the constant rate of return achieved over a time period which makes it an essential tool in highlighting changes in direction and momentum of the data series.
Quarterly v Annual Data
The BEA publishes quarterly data for the Transportation and Warehousing Sector (Industry Id 36) every quarter. For the 8 sub-sectors of the Transportation and Warehousing Sector, the BEA publishes annual GDP data.
CONTEXT
In 2015 the Transportation and Warehousing Sector GDP was valued at $542.5bn in 2015, up 112% from $256.1bn in 1997. US GDP was valued at $17.9tn in 2015 so the sector accounted for 3% of the national economy in 2015.
There are 8 sub-sectors in the Transportation & Warehousing Sector. The sub-sectors and their 2015 mix and values were:
- Truck transportation 27% share | GDP$145.8bn | grew by 88% since 1997
- Other transportation &support activities 22% share | GDP$118.4bn | grew by 112% since 1997
- Air transportation 18% share | GDP $95.7bn | grew by 80% since 1997
- Warehousing & Storage 10% | GDP$56.8bn | grew by 170% since 1997
- Rail transportation 8% share | GDP$45.8bn | grew by 129% since 1997
- Transit & ground passenger transportation 6% share | GDP$34.2bn | grew by 128% since 1997
- Pipeline transportation 5% share | GDP$26.8bn | grew by 287% since 1997
- Water transportation 3% share | GDP$18.9bn | grew by 186% since 1997
Key points to note when looking at the 8 sub-sector performances are:
Truck Transportation: Though this sub-sector grew faster post-recession than pre-recession (4.9%pa v 4.7%pa) it suffered the most during the recession, declining by 5.7%pa for 2 years, losing $13.7bn of GDP in that period. Consequently its CAGR% of 3.6% for the 1997-2015 period is the second lowest of the eight sub-sectors, just ahead of Air Transportation.
According to the American Trucking Association around 68% of all freight tonnage transported domestically is by truck. 2015 revenues reached an all-time high of $719bn and trucks move about 10bn tons of freight.
Other Transportation & Support Activities: This sub-sector CAGR% profile is similar to the Truck Transportation sector, as post-recession growth was higher than pre-recession (5% v 4.9%) but the decline during the recession was much smaller at 0.8%pa. and GDP fell by $1.5bn as a consequence. The post-recession growth of 5%pa is the 4th highest of the 8 sub-sectors. CAGR% from 1997-2015 of 4.3%pa was the third lowest.
Air Transportation: The third largest sub-sector, Air Transportation’s GDP CAGR% has varied the most of all. It grew the slowest at 2.6%pa pre-recession and the slowest for the 1997-2015 period at 3.3%pa. It also declined by 3.7%pa during the recession, the second largest sub-sector decline and lost $5.1bn in GDP in that 2 year period.
On the otherhand it has bounced back very strongly post-recession with a 7% CAGR from 2010 to 2015, the second highest rate behind Pipeline Transportation. As air transportation also includes the shipping of time-sensitive services for documents, small parcels and Ecommerce, the increasing rate of growth is likely to be influenced by the significant growth in internet sales.
Warehousing & Storage: This sector grew its GDP by 7%pa pre-recession and by 3.6%pa post- recession. It also managed to grow by an impressive 5.4% during the recession. The 1997-2015 CAGR% growth of 5.7%pa was third highest behind Pipeline and Water Transportation.
Rail Transportation: Rail Transportation grew by 2%pa during the recession and by 4.9% before it. Post-recession CAGR% of 5.3%pa is its fastest rate of growth, which has resulted in a 4.7% CAGR from 1997-2015.
High volumes of heavy goods will be transferred long distances using the 140,000-mile rail network, delivering 5m tons of every day. About 70% of coal, 58% of raw metal ores and 30% of grain would be moved on rail and the approximately 30% of US exports are made via rail.
Transit & Ground Passenger Transportation: This sector also achieved a CAGR of 4.7% from 1997 to 2015 but unlike Rail its fastest growth rate was pre-recession at 5.7%pa. It grew by 1.8%pa during the recession and by 3.9%pa post-recession
Pipeline Transportation: With a 7.8%pa CAGR from 1997 to 2015 this is the fast growing sector across the period and post-recession. It’s GDP increased by 287% to $26.8bn in 2015 from $6.9bn in 1997. Pre-recession growth of 6.8%pa has increased to 11.4%pa post-recession and 2.4%pa was achieved during the recession.
According to the Energy Information Administration (EIA) almost 34k miles of natural gas pipeline alone has been added from 1998 to 2015 inclusive at a cost of $77bn. (See EIA pipeline data here)
Water Transportation: The Water Transportation sector grew by 6%pa from 1997 to 2015, making it the second fastest growing sector behind Pipeline Transportation. But its slowest rate of growth has come during the post-recession period when it only achieved a CAGR of 2.2%pa. Prior to the recession it was growing by 8.3%pa and during the two years of recession it grew by 6.4%. It was the fast growing sub-sector before and during the recession but it is the slowest afterwards.
Water transportation carries about 76% of US exports by tonnage, via both foreign-flag and US-flag carriers.
MOMENTUM & DIRECTION
Measuring the compound annual growth rate (CAGR) of the Transportation and Warehousing Sector over the three distinct periods is a good way to measure the direction the sector is heading in and the momentum behind it. CAGR comparisons are made to other sectors and that data is presented in the following table for ease of reference. The sectors are:
Truck Transportation: This is the largest sub-sector of Transportation and Warehousing;
Transportation and Warehousing: This is the total sector covered in this post;
Trade: This includes the retail and wholesale trade sectors and are included to see if there is a correlation between it and the Transportation and Warehousing Sector;
Private Goods-Producing Industries: This measures the GDP of all goods-producing sectors in the economy and in separate from the private services sector and the government sector;
All industry Total: This is the entire economy GDP, including goods, services and government.
The color-coded key is as follows:
- Blue bar: Total period CAGR 1997 to 2015
- Green bar: Pre-Recession CAGR 1997 to 2007
- Red bar: Great Recession CAGR 2008 to 2009
- Purple bar: Post-Recession CAGR 2010 to 2015
Key observations are:
- The Transportation and Warehousing sector has out-performed its main component, Truck Transportation in every measure, which means the latter is losing market share. It has fallen from 30.2% share in 1997 to 26.9% share in 2015;
- CAGR in the Transportation and Warehousing Sector (and in Truck Transportation) has been higher post-recession than pre-recession (5.3%pa v 4.8%pa) but the opposite is the case in the Trade (4.5%pa v 4.4%pa), Private Goods Producing sectors (4.6%pa v 3.7%pa) and in the economy as a whole (5.4%pa v 3.8%pa);
- CAGR in the Transportation and Warehousing Sector is higher in all 4 periods compared to the Trade Sector and the Private Goods-Producing Sector. Post-recession CAGR of 5.3%pa is very high and is helped by a 7%pa increase in Air Transportation and an 11.4%pa increase in Pipeline Transportation;
- During the great recession the Truck Transportation sub-sector fell by 5.7%pa compared to a 1.3%pa decline in the Transportation and Warehousing Sector as a whole. Truck Transportation correlates more closely with the Private Goods-Producing Sector during the recession which fell by 5%pa while the Trade Sector decline of 2.1%pa is more aligned with the Transportation and Warehousing sector overall;
- The national economy only declined by 0.2%pa during the great recession, and this includes the services and government sector. As shown in the previous paragraph there are more appropriate guides to the health of the economy most relevant to the Transportation and Warehousing Sector.
REGIONAL PERFORMANCE
The BEA summarizes all data for the US in to 8 economic regions. The value of GDP for each region in 2015 is as follows:
The following table quantifies by US Region the Transportation & Warehousing Sector GDP for the same periods as those in the table above. Bearing in mind that the sector GDP increased by 112% from 1997 to 2015, the following are key observations by US Region in descending order of growth:
The Rocky Mountain Region grew by 161% from 1997 to 2015 to $23.1bn, a CAGR of 5.5%p.a. The region only accounts for 4% of GDP for the sector. Post-recession, growth of 7.2%pa is the highest in any region and exceeds the 5.7%pa CAGR achieved in the pre-recession period. The 1%pa decline during the Great Recession was lower than the 1.3%pa nationally.
The Southwest Region grew by 155% from 1997 to 2015 to $76.3bn, a CAGR of 5.3%pa. The region accounts for 14% of GDP for the sector, and it is the only region where the sector’s GDP grew in the 2008/9 period, in this case by 0.4%. Pre-recession CAGR of 5.9%pa was the highest in all regions and post-recession GDP CAGR of 6.2% is the second highest after the Rocky Mountain region.
The Plains Region grew by 115% from 1997 to 2015 to $45.4bn, a CAGR of 4.4%pa. The region is the third smallest and accounts for 8% of the sector’s GDP. Transportation Gross Domestic Product declined by 0.2% during the great recession, but grew by 4.7%pa and 5.3%pa in the pre- and post-recession periods respectively.
The Southeast Region grew by 113% from 1997 to 2015 to $130bn, a CAGR of 4.3%. The region is the largest, accounting for 24% of GDP for the Transportation & Warehousing Sector in 2015. GDP for the sector declined by 1.6%pa during the great recession but otherwise the growth has been consistent in the pre- and post-recession periods at 5.1%pa and 5%pa respectively.
The Far West Region grew by 108% from 1997 to 2015 to $93bn, a CAGR of 4.2%pa. The region is the second largest, accounting for 17% of Tranportation GDP. Growth has accelerated in the post-recession period to 5.7%pa, the third fastest, compared to 4.5%pa in the pre-recession period. The sector GDP decline of 2.2%pa during the great recession was well above the 1.3% nationally average and only exceeded by the Great Lakes (down 2.8%pa) and New Engladn (down 2.5%pa).
The Great Lakes Region grew by 95% from 1997 to 2015 to $80.6bn, a CAGR of 3.8%pa. The region is the third largest, accounting for 15% of Transportation GDP. Growth has accelerated in the post-recession period to 4.8%pa compared to 4.5%pa pre-recession but the sectoral decline of 2.8%pa in the Great Lakes region during the great recession was the deepest of all eight regions.
The Mid East Region grew by 92% from 1997 to 2015 to $77.7bn, a CAGR of 3.7%pa. The region is the fourth largest, accounting for 14% of Transportation GDP. Growth of 4%pa pre-recession was the slowest of all regions and though it has accelerated to 4.5%pa post-recession this is the second lowest rate of growth behind New England. The sector out-performed other regions during the great recession as it only declined by 0.1%pa for 2008/9, the second best performance behind the Southwest region.
The New England Region grew by 88% from 1997 to 2015 to $16.3bn, a CAGR of 3.6%pa. The region is the smallest contributor to Transportation GDP at 3% in 2015. New England is the only region where the rate of growth post-recession is slower than pre-recession, down from 4.6%pa to 3.9%pa. The recession period was difficult also, as Tranportation GDP declined by 2.5%pa, which was the second biggest regional decline, behind the Great Lakes. The New England economy has struggled more than most and is also transitioning to a service based economy faster than some of the other regions.
CONCLUSION
There are huge variations in the economic performance of the Transportation and Warehousing Sector across the sub-sectors and the geographical regions. The sector is out-performing the national economy, and the gap has widened post-recession due to very strong growth in Pipeline (+11.4%pa) and Air Transportation(+7%pa). Pipeline Transportation is growing three times faster than Truck Transportation.
On top of that there is a wide variation in the performance of the Transportation sector geographically. The sector is growing almost twice as fast in the Southwest (155% 1997 to 2015) and Rocky Mountain (161% 1997 to 2015) Regions compared to New England (+88% 1997 to 2015).
