ANZ says the size of the May jump makes it worth examining in closer detail. In particular, it is important to know whether the jump was in light or heavy traffic, or both, and also to consider some possible causes – in essence, is it a red herring, or an indication of real activity?
“It is suspected that some of the strength in the May result will reverse in June,” says Zeller. For all the roads where seasonally adjusted traffic flows jumped sharply up in May, it was caused by raw traffic flows not falling by as much as they usually do in May.
“If we return to the usual seasonal flows in June, the Truckometer will fall back sharply. But the jump up in May is large enough to matter, even if it is reversed – it’s the quarter average, not the end point, that matters for GDP.
“We still need to know what caused it. If it simply reflects that the weather in May was far more summery than usual (indeed, it was the warmest May on record), and this caused people to head off on those weekend trips that they had postponed, then the implications for GDP are limited. But if it’s real production, then it should not be discounted.
“The jump in May traffic was evident for both classes of vehicle, whereas heavy traffic usually follows light with a 6-month delay. This is a reason to perhaps suspect that the result may be weather-affected, rather than reflecting economic momentum. However, this doesn’t mean it should be ignored.”
Zeller says the jump was most marked for the heavy traffic, which had its second-largest leap in the history of the series (in percent change terms). But it wasn’t one aberrant data series to blame.
“Of 21 traffic series used in the three indexes we report, 12 jumped by 3% or more seasonally adjusted. Of those 12 roads, 9 were heavy traffic. And of those nine, eight are located on major transport routes to/from dairy factories. Autumn (March/April/May) dairy production is estimated to be at least 35% higher than its 4-year average, quite likely more.
“Meat production in this period has also been solid, as farmers have held on to stock longer to make the most of excellent pasture conditions. We therefore suspect that while some of the large jump may well be “noise”, much of it is a real economic signal – but one that refers to Q2, rather than Q4, as the Truckometer’s lead would usually imply.
“Holding back stock is primarily a timing effect (though the animals are heavier than they would have been, increasing value-add). But the extra milk is pure bonus production, which will feed directly into GDP.
“In sum, then, if this interpretation is correct, the traffic data, combined with other information, suggests that base momentum in Q2 was weak – to the point of going backwards – but that high late-season primary production will come to the rescue.
“We’ll have to wait for Q2’s partial indicators to get the full story, and see which factors will win out in total GDP terms. The agriculture sector accounts for around a fifth of GDP all up, so it will be an intriguing battle,” says Zeller.
The Truckometer remains under development and subject to revision.
