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6 Ways the transport sector helps track economic growth
As a stock market investor, the earlier we identify a potentially winning trend, the better. This way, we can buy stocks at a cheaper rate before the prices rise. So, we look for all kinds of indicators that could give us an idea about the future. At such times, looking at the transport sector can be quite helpful. Here are 8 indicators to track:
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Car sales:
When do people buy cars? When they have extra money with them. This means an increase in car sales could indicate that people have more money at their disposal. And when this disposable income goes down, car sales fall. People usually tend to have more money when the economy prospers. So follow the trend in car sales to get an idea about real economy growth.
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Commercial vehicle sales:
The previous point was about car buying by individuals. A similar logic can be applied to companies buying commercial vehicles too. The sales of such vehicles can indicate whether companies are prospering.
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Two-wheeler sales:
There’s often a wide disconnect between growth in India’s cities and rural areas. So, it’s important to look at data specific to the rural and urban areas. Now cars are usually a city phenomenon. Two wheelers, on the other hand, can represent growth in rural areas as well small towns.
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Tractor sales:
India’s manufacturing and services industries are main contributors to the economy. But that doesn’t mean agriculture is not important. The sector still employs around 70% of India’s population. So if you want to know how this population is progressing, look at tractor sales data. Basis this, you can consider picking stocks of companies with high rural sales. This is because a rise in tractor sales could mean improvement in agricultural productivity and farmer incomes. And higher the income, greater could be consumer spending.
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Air traffic:
When you plan your travel, when will you opt to fly? When the trip is short and you to travel quickly, or when you have enough money to afford the costlier tickets. Otherwise, train and road travel is likely to be cheaper and preferable. This makes air traffic a classic indicator of the rise in disposable income in the country. That said, it’s important you compare any rise in traffic to discount sales. Those can artificially fuel demand.
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Rail freight, cargo traffic:
When companies produce goods, they have to move them around and distribute the goods in various markets. So you can check companies’ productivity by tracking the movement of goods through rail freight and cargo.
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24% - 34.5%
The rural economy is very closely tied to whether the monsoon is normal or not. This can be seen in the fact that the two tractor companies—Escorts and Mahindra & Mahindra—posted high growth in sales in the month of July 2017 compared to the previous year. Escorts reported a 24% rise in tractor sales while M&M announced sales grew 34.5%, according to a moneycontrol.com report. This can be linked to the normal monsoon this year compared to last year when rainfall was less than average.
