Ever ponder whether automobile miles traveled (VMT) does a very good job of predicting recessions? It is best to’ve stopped after taking a look at this Econbrowser put up from January 4th, however I believed an replace to most up-to-date information could be of curiosity as we acquire December information. First check out what VMT does over recessions, versus heavy truck gross sales (instructed by Calculated Threat at some factors), and the eponymous Sahm Rule (actual time model).
Determine 1: 12 month development charge within the automobile miles traveled, n.s.a. (teal), in heavy truck gross sales, s.a. (tan), and Sahm rule indicator – actual time (black). Sahm rule is 3 month transferring common unemployment charge relative to lowest unemployment charge in final 12 months. Crimson dashed liine denotes threshold for Sahm rule indicator. NBER outlined peak-to-trough recession dates shaded grey. Hypothesized 2022H1 recession shaded lilac. Supply: FHA by way of FRED, Census by way of FRED, FRED, and NBER.
It’s laborious to see, however the 12 month change in VMT declined a number of months in the past earlier than recovering in December (it’s this decline that Mr. Steven Kopits pointed to), whereas heavy truck gross sales have been up by January, y/y. The Sahm rule is precisely at zero as of the February information launched yesterday (it wants 0.5 ppts to breach the edge).
In any case, VMT development is a awful indicator of recession (McFadden R2 of 0.07) in comparison with heavy truck gross sales (0.28) (see regression outcomes on this put up).
Wanting ahead, I might be much more cautious about utilizing VMT as an indicator, on condition that the connection between VMT and GDP has seemingly skilled a structural break. In Determine 2 I plot Car Miles Traveled (seasonally adjusted) at a quarterly charge per US GDP at a quarterly charge (in order that the models are Car Mile Traveled/actual greenback GDP). There’s an apparent development at 1.15 p.c lower per yr over the 2000-19 interval. (I estimate a stochastic development given I can’t come near rejecting a unit root within the log ratio.) Utilizing the estimated development to mission ahead, I acquire:
Determine 2: Car Miles Traveled per Ch.2012$ GDP (blue line), and stochastic development estimated over 2000-19 (tan line), on log scale. NBER outlined peak-to-trough recession dates shaded grey. Hypothesized 2022H1 recession shaded lilac. Supply: FHA, BEA, NBER, and creator’s calculations.
In different phrases, Mr. Kopits took the downshift to a seemingly new development line as a cyclically induced discount in VMT.
