UPS Sheds Leading Indicator Status

"FedEx is a strong indicator of the economy," says FedEx spokesman Howard Clabo. "Whether economists choose to view FedEx as a leading indicator is up to them.

"Our broad transportation portfolio that cuts across virtually every sector of the economy, especially high-tech and high-value goods and services; our central role in facilitating e-commerce; our global reach and our fast cycle practice make us a solid indicator of the overall economy," Clabo says.

UPS and FedEx ought to be called "concurrent indicators," says Brian Clancy, managing director of MergGlobal, an Arlington, Va., transportation consulting firm.

"The closer you are to final consumption, the more likely it is that you are a concurrent indicator," he says. "The leading indicators are further up in the supply chain, moving stuff between factories or from factories to distribution centers."

True Indicators

Clancy says he has always wondered at the conventional wisdom about the overnight shippers as leading indicators. "I don't know who came up with that," he says. "It is conceptually incorrect, and has been for the last 15 years."

Because the small-package focus of the overnight shippers almost assures that their business is weighted toward just-in-time deliveries, the true leading indicators include trucking companies, railroads and inbound container flows from Asia, which "give you a three-to-six-month window on how everyone is viewing the economy," Clancy says.