Transportation

U.S. Car Sales Boosted from "Cash for Clunkers" Program

Americans are borrowing less these days after banks and credit card companies tightened lending standards due to the financial crisis. According to a Federal Reserve report, consumer credit fell at an annual rate of 10% in July to $2.5 trillion.The $21.6 billion drop was the sixth consecutive decrease, making it the longest series of declines since 1991.

The record drop in borrowings by Americans and a high unemployment rate (that jumped to a 26-year high last month) suggests that business and government spending, rather than consumer purchases, will determine the strength of recovery from the worst economic slump in more than 70 years.

In the U.S., private cars are used to meet nearly 50% of passenger transportation demand. Accordingly, the Obama Administration introduced a "cash for clunkers" program under the $787 billion stimulus. Under the programs, the federal government offered car owners rebates of $3,500 to $4,500 on new car purchase. Altogether, rebate applications worth $2.87 billion were submitted and an estimated 450,000 extra cars have been sold. U.S. car giants Ford and GM announced production increases for the third and fourth quarters as a result of the demand generated by this program.

Transportation Services Index Shows Small Recovery

The U.S. Department of Transportation’s Bureau of Transportation Statistics stated that the Freight Transportation Services Index (Freight TSI), which measures the month-to-month changes in freight shipments in ton-miles, increased by 0.7% in August 2009 compared to the previous month. The index measures the month-to-month changes in the output of services provided by the for-hire freight transportation industries. The index consists of data from for-hire trucking, rail, inland waterways, pipelines, and air freight. The index had bottomed out in June 2009, the lowest level since June 1997.

Also, the passenger TSI, which measures the month-to-month changes in travel conducted in the for-hire passenger transportation sector, increased by 0.8% to 111.2, compared to the previous month.

The combined TSI, which merges the freight and passenger indices into a single index, was down 9.2% to 99.5 in August 2009 compared to August 2008. The index has declined 12.3% since its historic peak of 113.5 in January 2008.

"While some numbers are encouraging, I would not get too excited just yet,” said Eric Starks, President of freight transportation forecasting consultancy for FTR Associates. “But they do tell us that economic conditions did not deteriorate at the same level in the second quarter as the first. It appears that the ‘bleeding’ has stopped or is coming to an end, and that the long healing process has begun."