CS Freight Forecaster
FORECAST REDUCTION
Not As 'Stimulative' As Hoped;
Tonnage Now Seen Down 14% in 2009
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The $787 billion US fiscal stimulus package, as constructed, looks as if it will
deliver less ‘stimulus’ than originally anticipated. As such, our economics
team has cut its forecast for 2009 GDP to negative 2.2% vs. the previous
negative 1.5%, with all of the revision concentrated in 2H09 (which now
stands at +1.5% vs. the prior +2.5%).
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This shift translates to a downward revision in our Freight Forecaster, which
now calls for tonnage to decline by 14% in 2009 vs. our prior 13%.
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Specifically, manufacturer’s orders of consumer goods (the most heavily
weighted model input) is now forecast to decline 12% in 2009 vs. our old
estimate of a 9% decline. Our outlook for real exports has also deteriorated,
now seen down 12% in 2009 vs. our old estimate of a 10% decline. The
other two factors in our regression model, manufacturing IP and real interest
rates, are relatively unchanged this month.
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On the back of our latest freight forecast we have made a notable downward
revision in our outlook for railroad carloads. We are now expecting carloads
to decline about 13% in 2009, vs. our prior forecast of a 7% decline.
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For most of the last 18 years, railroad carloads experienced less extreme
peaks and troughs than truck tonnage. However, in more recent periods
(last 5 years) the two series have tracked each other much more closely.
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And so far this year, unfortunately, railroad carloads have been down as
much – if not more – than the overall tonnage number. Thus, we now think
it is unreasonable to expect carloads to outperform overall truck tonnage.
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We have revised our earnings estimates across the group. We have cut our
2009 railroad EPS numbers by an average of about 15%, the deepest
revision second only to LTL, where higher operating leverage produced an
average EPS cut of about 19%. Other transportation sub-sectors averaged
closer to a 10% EPS hit.
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Transportation stocks have been hammered in the last month, down about
20% to 30%. As we discuss in this month’s Under the Hood report, much of
the deterioration in freight demand has quickly made its way into the stocks,
though consensus estimates lag considerably.
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Con-way, in particular, looks to have been appropriately re-priced for much
weaker freight; we are raising our rating to Neutral from Underperform.

Investment Summary
In Credit Suisse’s latest edition of US Economics Digest (published February 27), our
economics team reduced its GDP forecast for 2009 to a decline of 2.2% (from -1.5%
previously). The downward revision is due to a “less simulative” stimulus plan than
originally anticipated.
As our economics team points out in its report, most of the stimulus package will not even
affect the economy until 2010 or later, with just over 1/5th of the cash flow occurring in
fiscal year 2009. Additionally, the Congressional Budget Office scoring of the bill puts
almost 25% of the overall package in 2011 or later.
Our economics team is also disappointed with the labeling of certain items as “stimulus,”
such as health insurance and education assistance. In their view, it is unlikely these
items will translate at the macroeconomic level into the kind of cash flow, income and job
boosters that stimulus should aim at.
Furthermore, we believe there is too little support in the intermediate horizon for the sector
of the economy that requires the most urgent attention – households. Direct payments to
individuals, such as increases in jobless benefits, food stamps and health care assistance,
amounts to just $75 billion in the current fiscal year.
Downward revisions are concentrated in the second half the year, primarily in consumer
spending, but also in residential investment, non-residential structures investment and
state and local government expenditures. As a result, our new second half 2009 GDP
growth estimate is now 1 percentage point lower than before (+1.5%, from +2.5%).

[此贴子已经被作者于2009-3-17 16:34:55编辑过]