Transportation Services Index
What is the Transportation
Services Index (TSI)?
The TSI is a monthly measure of the volume of services performed by the
for-hire transportation sector. The index covers the activities of for-hire
freight carriers, for-hire passenger carriers, and a combination of the two.
The TSI is still under development and is therefore experimental. It is being
examined for refinements in data sources, methodologies, and
interpretations.
What does the index tell us?
The TSI tells us how the output
of transportation services has increased or decreased from month to month.
The index can be examined together with other economic indicators to produce
a better understanding of the current and future course of the economy. The
movement of the index over time can be compared with other economic measures
to understand the relationship of transportation to long-term changes in the
economy.
What areas of transportation
are covered by the index?
The freight transportation index consists of:
- for-hire trucking (parcel
services are not included),
- freight railroad services
(including rail-based intermodal shipments such as containers on flat
cars),
- inland waterway traffic,
- pipeline movements (including
principally petroleum and petroleum products and natural gas), and
- air freight.
The index does not include international or
coastal steamship movements, private trucking, courier services, or the United
States Postal Service.
The passenger transportation index consists
of:
- local mass transit,
- intercity passenger rail, and
- passenger air transportation.
The index does not include intercity bus, sight
seeing services, taxi service, private automobile usage, or bicycling and
other nonmotorized means of transportation.
The components have been selected to give the best
coverage possible of the for-hire transportation industry, subject to current
limitations on the availability of monthly data. They are grouped to conform
to the classifications used in the National
Income and Product Accounts.
Why was the index developed?
In fiscal year 2002, researchers from the State University of New York at
Albany (Kajal Lahiri and Vincent Yao) and George Washington University
(Herman Stekler) studied the relationships between transportation data and
measures of the economy. Support for this research was provided through a BTS
research grant on "Leading Economic Indicators for the Transportation
Industry." One of the outcomes of the research was the creation of a set
of indexes that reflected passenger, freight, and total transportation
services output. These indexes, which were originally designed to serve as
coincident measures of the transportation sector of the economy, were recognized
as valuable measures that BTS should produce and provide to the public.
Economists, forecasters, and others use monthly
economic measures to understand the performance of the economy, to understand
the short-term relationships among different sectors of the economy, and to
forecast the performance of the economy, particularly business cycles. To do
this they use measures called “indicators,” such as employment, manufacturing
production, sales, business inventories, purchasing managers’ plans, and consumer
confidence, among other things. In addition to giving information that is
valuable in its own right, the indicators often have a relationship with the
growth of the economy, measured by Gross Domestic Product (GDP).
There are several types of indicators:
- Coincident indicators tend to move along with
GDP—that is, when GDP increases, they increase, and vice versa.
- Leading indicators portend changes in GDP—that
is, when they go up, GDP tends to go up some time later; when they go
down, GDP tends to eventually drop.
- Lagging indicators tend to follow fluctuations in
GDP—when GDP goes up, these measures ultimately go up, and when GDP goes
down, these indicators tend to later decline.
All of these indicators help economists,
forecasters, investors, and business decisionmakers better understand the
course of the economy. Leading indicators are especially useful in
forecasting turning points in the economy, which are of particular interest
to economic decisionmakers. Coincident indicators are also useful in determining
the current state of the economy.
Until now these measures did not include an
overall multimodal monthly indicator based on production of transportation
services—an economic sector of great interest to the business and
policymaking community. BTS has learned that many in the forecasting and
academic communities would particularly like to see such a measure. It could
be used in conjunction with other indicators, such as inventory change and
consumer confidence, to forecast future economic performance. It could also
be used to provide confirming evidence of current economic performance as a
coincident indicator. The academic and policy communities could use it to
better understand the short-term relationships between transportation output
and other economic sectors.
To provide such a measure, BTS undertook
development of this experimental index of output in the transportation
industry. The services produced by each subsector of the industry are
measured in terms of physical outputs—ton-miles for freight modes and
passenger-miles for passenger modes. These data are then deseasonalized,
adjusted, indexed, and combined to create the monthly index.
What does the index provide
that other transportation data do not?
TSI is the only combined, multimodal, seasonally adjusted economic measure of
transportation measured on a monthly basis.
How was the index put
together?
Data Gathering
The BTS staff gathered monthly data for each mode of transportation from
a range of government and private sources.
Forecasting
Some data series were not complete through December 2003, the ending date
through which we published the initial index. BTS, therefore, forecast the
one or two missing months, using a statistical technique known as an auto
regressed moving average. As production of the TSI continues, the need to
forecast missing data will be reduced. However, it is not uncommon in indexes
of this type for monthly data to be delayed because of reporting or other
problems and for preliminary data to be subsituted.
Deseasonalizing
Because the principal purpose of the index is to reflect monthly shifts
in transportation services output, and analyze short-term trends, it is
essential that it be adjusted for the normal seasonal changes that impact the
transportation sector. Transportation is highly seasonal, and without
adjustment the index would not give an accurate picture of underlying changes
in transportation output. BTS has therefore deseasonalized the data for each
mode using standard statistical methodologies.
Indexing
While physical measures are gathered for each mode, ultimately for
combination and analysis, the data from the different modes must be converted
into an index. BTS uses 1996 as the base year and indexes by dividing the
current monthly value by the average value for the 12 months of 1996.
Weighting and Chaining
The final step in creation of the index is combining the individual mode
indexes into the three summary indexes, the freight index, the passenger
index, and the overall, or combined, TSI. The weighting is based on the
relative economic value added of each mode. Not all ton-miles are equivalent
in their economic importance, nor are all passenger-miles. For example, the
average price paid per ton-mile for freight moved by rail is less than the
average price paid per ton-mile for freight shipped by truck due to
differences in factors such as haul length, shipment volumes, and resultant
economies of scale. By using an economic measure for weighting, we recognize
these differences and make the index more valuable as a transportation
measure that can be used together with other economic measures, such as GDP.
Value added is used for consistency with other
indicators that are used in relation to GDP, for example industrial
production. By using value added, rather than gross revenues for each sector,
we avoid double counting inputs (i.e., diesel fuel) to the transportation
sector.
Because value-added data is available from the Bureau
of Economic Analysis on an annual basis only, weights are determined annually
and applied throughout the year.
Valued added reflects the volume of physical
transportation as well as the value of that volume. Because we have already
measured monthly changes in that volume, it is necessary to ensure that
changes in volume are not double counted in the process of adjusting the
weights for the index. This is accomplished through a mathematical process
called chaining, which follows standard methodologies established by the U.S.
Census Bureau for similar indexes.
What are some limitations to
the index?
- By its nature, the TSI takes a macro-level
view of transportation and cannot substitute for detailed data in examining
local and mode-specific transportation issues.
- The TSI does not yet cover 100%
of the for-hire transportation industry. In some cases “tons” are used
as a proxy for ton-miles and “passengers” as a proxy for passenger-miles.
While there is justification for these substitutions, given data
limitations, it would be ideal to have actual ton-miles and passenger-miles
for all modes. Similarly there are some modes for which BTS must rely on
privately collected, proprietary data.
- There are some issues that
relate to transportation and the economy that the TSI does not address. These
are explained more fully in section 8.
What are some areas that the
index does not cover?
Does the TSI show the benefits of each transportation mode? No, the index
is not an estimate of the benefits of each mode of transportation.
Transportation exists to serve the rest of the economy, by providing mobility
and accessibility for passengers and freight, and the TSI measures only
monthly physical output. It does not address such topics as the impact of
freight modes on business logistics or the impact of passenger modes on
communities. The “value added” measure used in constructing the index is a
concept related to input-output analysis, which relates the addition in value
to gross domestic product (beyond inputs already accounted for) generated by
an industry sector. It is not an evaluation of the external benefits of a
sector or mode of transportation.
Why aren't passenger automobiles, private or in-house trucking, and so forth. covered in the TSI?
The TSI is intended to
measure the for-hire transportation services industry, which like other
service industries has in the past not been as well represented in economic
indicators as manufacture of goods. Much freight movement and passenger
travel in the United States is not provided by the for-hire transportation
industry, but by private individuals and by nontransportation firms.
Passenger movement by private automobiles is not included in the TSI, but is
found in other economic indicators. Similarly, in-house trucking operations
run by retailers, manufacturers, and other nontransportation firms are
excluded. The index also does not cover transportation equipment, fuel, and
other related businesses that provide inputs for transportation services. Finally,
other, existing economic indicators address sale of goods; the TSI does not.
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