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What is the Commodity Flow Indicator?

The Commodity Flow Indicator (CFI) is a measurement of the ratio of the total U.S. industries which has constant or increasing freight flows on the transportation infrastructure. 

The following CFI represents the freight flows by truck only, the CFIs for the input factor goods is created usinng 95 different commodities. The CFIs for the finished goods is created using 52 different Commodities. 

The interpretation of the CFI is the following:

A firm’s output inventory can only be increased through the flow of production and decreased by the flow of shipments. Similarly, its input inventories can only be increased through the flows of deliveries of input factors and decreases with the flow of production. Thus, without changes in these flows, the past accumulation into the stock will persists. The stocks are in other words accumulations which correspond to the past expectations of the agents. 

Within the framework of bounded rationality and adaptive expectations, the expectations of the agents’ should only change when the actual state of affairs differs from the perceived state of affairs and the larger the error, the greater the rate of adjustment in the expectations (Mass, 1980). 

Hence, an increase in the CFI reflects an increase in the number of industries that faces economic activities which are larger than their past expectations, and a reduction in the freight flows reflects economic activities which are lower than that which was expected by the agents.


Data October 2012:


Commodity Flow Indicator Durable Good Industries:

Both the CFI of the input factor goods and that of the final sales among the durable goods industries remain high for October. For the time being this suggests that the industries has sufficient access to credit to maintain operation. However, the inflows of input factor goods (top grap) continues to stay higher than the outflows from the output inventories (bottom graph). It will be highly interesting to see if the comming sales figures will justify this expansion in the expectations.

Commodity Flow Indicator Nondurable Good Industries:

The CFI of the nondurable indstrues paints a less optimistic picture. While both the CRI of the input factor goods and that of the final sales appears to have stabalized somewhat, the disapointing christmas sales reported by Zero Hedge is anything but good news for the industry:

(More to come)

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