What are transportation fuels telling us?

We follow transportation fuel sales volumes because they have a tight relationship with overall and manufacturing employment. The data are released with a lag, but they still provide a lead on the health of employment, especially manufacturing employment.

There’s been quite a bit of price action in the sector. Since bottoming out at $26.19 per barrel (bbl) on February 11th, the WTI price of crude has recovered to near $50; since mid-February the average price of regular gasoline has risen from $1.64 to $2.24 per gallon and the average price of diesel has increased from $1.98 to $2.36 per gallon.

Since the end of April, the nation’s crude oil inventory has decreased by almost 3 million bbls, or 0.1%. Domestic production has decreased by 11.5% since peaking during March 2015, shale oil production has decreased by 8.4% its March 2015 peak.

During December 2015 (most current data), diesel fuel sales increased by 82.5 million gallons (2.3%) nationwide over the year. During the prior 3-, 6-, and 12-months, increases were 2.5%, 3.1%, and 2.5%. This brought the 1-month diffusion index below 50 for the first time since May 2015, or from 52.9 to 47.1, as shown in this graph:


This next chart shows that the strongest diesel sales growth occurred in the Southeast, Great Lakes and Rocky Mountain regions during the past three months, while sales fell in the Southwest, Plains and Mideast regions.

Diesel yy

The 3-month-average growth rate for diesel sales bounced back from November’s 1.81% to 2.49% in December. During April, the relevant month, total employment growth rate decreased from 1.99% to 1.88%. The growth rate for manufacturing employment moved up from -0.20% to -0.16%, and remains near the lowest level since September 2010. Although other indicators imply some positive signs for growth in the manufacturing sector, diesel fuel sells imply growth in this sector will remain subdued through much of the remainder of 2016:

Employ diesel