Air Travel Industry: A Real-World Proof Of A Growing Economy
Craig Adeyanju | Jun 19, 2015 05:06PM ET
For the most, analysts want you to believe that the economy isn’t growing. And the fact that the Fed didn’t say in particular when it would hike interest rates in its last press briefing further strengthens the believe that the economy is struggling. At such a time, I believe it would help if investors would look around for more hands-on metrics – things that feel realer than GDP and unemployment metrics – to judge the state of the economy. After all, if the stories that financial metrics tell are true, then we should see evidences all around us. The air travel industry is one place to look. I touch on this in my last article, but we're going deeper here.
For the record, transportation is one of the pillars of any economy. When the economy is growing, it is inherent that transportation demand will be on the up, since growth is naturally unachievable without movement. On the other hand, when the economy is struggling or regressing or in recession, the demand for transportation will decline. And for a sophisticated economy like US, the air travel space would always be a pointer to the state of the economy. That said, here are two ways the air travel space is showing that the economy is heading north.
Improving air traffic
The first quarter of this year quite tells the entire story of the growth of the economy. For the record, the first quarter is traditionally the weakest in any given year. However, airlines posted record results for the quarter, most of which broke the records set during the first quarter of last year.
Source: travel.trade.gov
The chart above looks at international travel data to and from the US. As it says, US international air traffic during the first quarter was up five percent year-over-year. In 2014, US domestic traffic was up 1.7 percent. The above is a result of one of two things – or both. First, more people had reasons to take to the sky for business reasons. Second, more people can afford travelling for leisure. One sure thing is that both of these scenarios indicate a positive vibe in the economy.
Like I said in my last article, another pointer that the US economy is growing is a recent focused on improving labor market conditions to a certain level before raising rates. So the most possible reason for the rate hike delay is that the labor market isn’t yet at the level it wants. This doesn’t mean the economy isn’t improving.
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