Transportation and warehousing is an industry that is important to everyone, whether you’re an individual flying home to visit family or a business expecting a shipment of raw materials. In the first quarter of 2015, transportation and warehousing subtracted 0.56 percentage point from real Gross Domestic Product, and was the largest contributor to the 0.2 percent decrease in GDP.
That sounds straightforward enough, but what exactly does that mean?
Contribution to growth—or in this case, a contribution to a decline–isn’t solely a matter of looking at the percent change in real value added by an industry. Instead, the contribution is based on both the quarter-to-quarter change and the size of the industry in the economy.
For instance, real (inflation-adjusted) value added for transportation and warehousing fell 17.3 percent, a smaller percentage point decrease than that of the utilities industry, which fell 18.4 percent. However, transportation and warehousing is a larger industry than utilities. Because transportation and warehousing is larger, that 17.3 percent decrease translated to a $20.7 billion decrease, while the smaller utilities industry’s 18.4 percent decrease translated to a $14.4 billion decrease. This explains why the transportation and warehousing sector contributed 0.56 percentage point to the overall decrease in GDP, while the utilities sector contributed 0.34 percentage point.
This distinction is important because looking at the industries that subtract the most from GDP when GDP falls (or, conversely, contribute the most to GDP when GDP increases) typically points us toward those industries where notable things are happening.
In the case of transportation and warehousing, the notable thing that happened in the first quarter was a sharp drop in real gross output – a measure of an industry’s sales or receipts.
If you’re one of the millions of travelers whose flight was canceled during the unusually harsh winter of 2015, this probably isn’t surprising to you. Heavier than normal snow in the Northeast directly impacted air transportation, a component of transportation and warehousing. Of course, the harsh winter began in December, and as you can see here, transportation and warehousing declined in the fourth quarter of 2014 as well even though overall GDP was increasing 2.2 percent. But when you look at relatively milder winters, such as the winter in the first quarter of 2013, you see that transportation and warehousing increased.
Indeed, the weather in the first quarter of 2015 impacted many portions of the transportation and warehousing industry, which also includes rail transportation, water transportation, truck transportation, transit and ground passenger transportation, pipeline transportation, various support activities, couriers and messengers, and warehousing and storage.
Truck transportation, the largest component of transportation and warehousing, was likely affected not only by the harsh weather but also by work slowdowns at several ports along the West Coast. Slowdowns at the ports translated into less (or no) cargo loaded onto trucks, leaving trucks underutilized (or idle) when they would otherwise be delivering goods. In addition to the direct impact on the output of the transportation and warehousing industry, trucking is a critical input to the production processes of many other industries. For example, the wholesale and retail trade industries depend heavily on truck transportation, and both showed a notable decline in their purchases of transportation services in the first quarter.
You may have noticed that subtracting 0.56 percentage point from GDP means that transportation and warehousing accounted for more than the actual 0.2% decrease in real GDP. This is because other industries grew in the first quarter. BEA’s quarterly GDP-by-industry statistics help us to better see the inner workings of the economy and provide a comprehensive picture of U.S. industrial performance.