Transport Services Aided By Multiple Tailwinds: 3 Top Picks

The healthy state of the U.S. economy is highlighted by the fact that consumer confidence — a key determinant of the economy’s health — touched an 18-year high in August 2018. Moreover, the U.S. economy witnessed the fastest wage growth since 2009 and added jobs for the 95th straight month in August.

Strong U.S. macroeconomic fundamentals along with rising disposable income in the hands of Americans, thanks to a much-improved job scenario, are encouraging them to increasingly go for vacations.

With the broader transportation sector standing to benefit from an improving domestic economy, it is obvious that companies offering logistics, leasing and maintenance services to transporters are also reaping the benefits.

Strong Freight Demand & Other Tailwinds

Increased freight demand is a tailwind for third-party logistics companies like C.H. Robinson Worldwide, Inc. (CHRW – Free Report), which falls under the Zacks Transportation Services industry. Higher freight rates coupled with robust shipping demand are major the positives for service providers. With the economy on a solid footing as mentioned above, demand for freight is on an upswing. This is because robust growth in manufacturing, construction, mining and automobile production leads to an uptick in freight demand.

The upbeat freight scenario in the United States is highlighted by the fact that the Cass Freight Shipments Index increased 6% year over year in August to 1.227. Importance of the data can be gauged from the fact that many market watchers consider the Cass Freight Index as the most accurate measure of freight volumes and market conditions.

Moreover, the Trump administration intends to spend a whopping $1.5 trillion on several infrastructure projects like constructing new roads, bridges, highways, railways and waterways across the country over a period of 10 years. This project is likely to generate significant demand for the manufacturing sector, which in turn will boost freight demand, thereby aiding the transportation services industry.