Cycles in the Transportation Sector and the Aggregate Economy

Abstract

Transportation plays a central role in facilitating economic activities across sectors and between regions, and is thus essential to business cycle research. Using four coincident indicators representing different aspects of the transportation sector that include an index of transportation output, payroll, personal consumption and employment, we define the classical business cycle and growth cycle chronologies for this sector. We find that, relative to the economy, business cycles in the transportation sector have an average lead of nearly 6 months at peaks and an average lag of 2 months at troughs. Similar to transportation business cycles, growth slowdowns in this sector also last longer than the economy-wide slowdowns by a few months. This study underscores the importance of transportation indicators in monitoring cyclical movements in the aggregate economy. (Keywords: Business cycle, Composite coincident index, Dynamic factor model, Regime switching, Growth cycle)