Understanding correlations between NFI movements and macroeconomic indicators

We tried understanding and establishing correlations, if any, between National Freight Indices and other Indian economic indicators. In other words, we compared the National Freight Indices’ monthly averages at pan-India and all trucks, only Open, only Container & only Trailers levels against monthly averages of several other market indicators. To start with, we put together monthly average values from

  • Fuel
  • Inflation
  • Interest rates
  • Industrial production
  • Stock market sectoral and composite indicators
  • Other lead indicators for freight such as Index of Industrial Production, Purchasing Managers' Index


Some of the observations we came across are:

  • NFI Open and NFI Container have moderate to strong correlations with fuel, inflation and interest rate-based indicators. These are understandable as all three buckets directly impact the input costs for truckers. As stated here – trailers are apparently immune from shock in factor prices and follow a fairly stable index curve.
  • NFI Container is strongly correlated to national fuel prices (90% correlation) as compared to NFI Open (40% correlation). This means Container truckers are more likely to pass on fuel price hikes and troughs to shippers than Open truckers.
  • NFI Open follows Wholesale inflation indices while NFI Container follows Consumer inflation indices. This is further evident in NFI Container’s strong movements with consumer facing indices such as FMCG, Pharma, India Consumption.

It is recommended that companies keep a tab on input cost factors such as fuel, inflation and interest rates to predict future freight rates. They can use sectoral indices as guiding principles which could further suggest direction and magnitude of freight rate trends.

Going forward, an outlook on the coming month for both the freight and its related industries will be shared on the RRE, based on the predictive potential of the indicators studied so far. For example, the commercial vehicles (goods) industry within auto sector should be specifically interested in the profitability indices – a measure of net income gathered by each segment, proxied by normalizing freight indices with fuel and interest rate expenses. Fuel is assumed to be 45% of the total freight bill, with EMI 30% of the interest expense. Any other factor costs influenced by inflation (e.g. driver salaries, maintenance) will not be reflected month on month. Hence,


Where, f = percentage of freight bill which towards fuel expense i = percentage of freight bill which towards vehicle EMI expense

Some of the interesting observations from the profitability indices are as follows:


  • Open, which constitutes >60% of spot market ton-km for India was netting less profits as compared to the start of the financial year primarily due to

    • Increasing fuel prices in Q2 FY19
    • Disproportionate passing on of fuel price burden to demand
    • Upward revision of repo rates twice by 25 bps in the financial year, leading to expensive loans
  • This was reflected in the 20% decline in sales of Medium and Heavy Commercial Vehicles (MHCV) segment of top CV manufacturers in the country for Nov 2018.
  • After the increase in loadable capacity after the gross vehicle weight (GVW) revisions, truckers have crossed the profitability levels of Apr 2018 in Feb 2019. Hence, FY20 Q1 can be expected to have good y-o-y growth in the MHCV Goods segment.

Write to us at nfi@rivigo.com