Cyclical and long-term changes in domestic and international economic activity have a strong impact on discretionary personal travel and shipment of goods, affecting demand for transportation infrastructure and services. Economic growth spurs commercial development, increases travel and trade, creates bottlenecks and strains the capacity of the infrastructure. Conversely, economic stagnation reduces development, travel, and trade. Economic stagnation also shifts demand for transportation from higher cost to lower cost services.
Economic growth shifts the pattern of transportation in important ways. As people’s incomes grow, they tend to buy more expensive goods, with a higher value per unit weight. The higher value of these goods means that the time they spend in transit is more costly to the shipper, so the shipper is more willing to pay extra for more expedited forms of transportation. As a result, air freight has been the fastest growing form of freight transportation over the past decade, with trucking close behind.
The increase in high-value cargoes means that transportation costs are a smaller percentage of the overall delivered cost of the product. Consequently, shippers can afford to locate their production at a greater distance from the ultimate consumer, to save on production costs. The result has been the growth of global outsourcing that has characterized the U.S. economy for the past quarter-century. This in turn has had tremendous effects on the transportation system, placing a greater burden on the international supply chain – marine carriers, ports, and intermodal rail – to deliver the goods.
Economic growth has changed the nature of demand for passenger travel. As people’s incomes have grown, they have traveled more, but their choice of mode of travel has shifted to air travel with both domestic and international destinations. Air passenger travel is a service with a high income-elasticity of demand – people buy proportionately more of it as their incomes grow. Over the past 20 years, as real incomes have risen by roughly 100 percent, airline passenger-miles have increased by 146 percent, highway passenger travel has grown by 49 percent, and population has grown by 28 percent. Thus, the economy is a significant external factor that can affect our ability to achieve our global connectivity goal.
