Our Transportation Infrastructure is Crumbling

A Leading Indicator: The Good Side of Traffic Congestion

Aug 4, 2013 • Behavioral Economics, Businesses, Economic Growth, Macroeconomic Measurement, Thinking Economically • 374 Views    No Comments

There might be a good news side to traffic congestion.

After all, roads get busier when mall visits increase. Rush hour gets worse when extra people commute. And don’t more package deliveries from UPS, FedEx and the USPS clog up streets? One firm that aggregates traffic data, INRIX, has even suggested that road traffic can be an economic yardstick.

Looking at road congestion data, INRIX reports that Luxembourg, the US, Ireland and Switzerland have the greatest increases. By contrast, drivers in Portugal, Hungary, Spain and Austria are “enjoying” relatively less traffic. More generally, the US is experiencing an uptick in congestion while most European nations are not.

From: Indrix

From: INRIX

 

From: OECD

From: OECD

The significance?

Checking GDP data, you can see a congestion correlation. Road traffic is going up in the US and so too is real GDP. Correspondingly, for the eurozone’s troubled economies like Portugal and Spain, traffic and GDP are contracting. For Hungary, while I am concerned about confirmation bias, a close look at the data seems to confirm the traffic GDP connection.

In fact, I wonder if we could call congestion a leading indicator. In the US, the Conference Board’s Leading Economic Indicators frequently foreshadow economic turning points. Based on 10 components, the index includes stock prices, building permits and consumer expectations for business conditions.

Perhaps changes in traffic congestion also predict future economic activity?

From: the Conference Board

From: the Conference Board

Sources and resources: For the perfect brief and readable overview of the INRIX traffic data, I recommend this Quartz article. However, it was fascinating to go to INRIX and see their data firsthand and read their traffic congestion scoreboard analysis. If you think that Hungary might be an exception to the traffic congestion/economic health correlation (do note that INRIX says we also have to check employment figures), then this Bloomberg article provides some insight. Finally, here is the source of my GDP stats and more information on the Conference Board’s Economic Indicators and their graph.

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