Oregon Office of Economic Analysis

Our friends over at the Oregon Department of Transportation have been busy. They are crunching numbers and writing reports on how COVID-19 is impacting traffic patterns, driving behavior, associated tax revenues, and the like. What follows is a quick summary of their latest reports and links to follow along as they publish updates.

First, a new report, written by Becky Knudson, tracks traffic volumes at 38 points along the state’s highway corridors. This includes spots along I-5, I-84, I-205, I-405, US-97, US-197, US-20, US-26, US-30, US-395, OR-18, OR-22 and US-101. As you might expect, traffic is down considerably in recent weeks. Looking at all the data, Oregonians are driving 40% less than a year ago. What I found interesting after digging into the numbers is that these declines are basically uniform across the entire state. Driving is down significantly everywhere. You can find weekly COVID-19 traffic reports here.

These declines in driving behavior basically translate one for one into reduced sales for motor fuels and gas taxes, which brings us to report number two, the latest ODOT transportation revenue forecast, developed by Dan Porter and Sata Torosyan. As forecasters, our office feels for Dan and Sata who did much of the development and building of the forecast in late February and early March, or right as COVID-19 really began escalating here in the U.S. As such there was no real data on the impacts of the virus, and macroeconomic forecasters more generally had yet to come to grips with the situation either. That said, they were able to build in some preliminary impacts, including the 40% reduction in driving and forecasting a drop in new vehicle sales. To their credit they also committed to updating the outlook in a few months once the hard data starts to roll in, you can find that update here when it is available.

While they may have found themselves in no man’s land in terms of the timing of the forecast, they did a great job in the report walking you through the potential impacts of COVID-19 on the various ODOT revenue sources, from gas taxes to DMV transactions to weight-mile and so forth. I want to highlight the report’s summary of trucking activity, as it clearly lays out what we have gone through in recent weeks but also where we are headed:

Initially we expect an increase in activity as households build inventories, which increase freight traffic to grocery stores and distribution centers. Also, there is some substitution between restaurants and grocery stores and between box retail and online retail. However, the substitution effect is likely not perfect, and after this initial stock piling is exhausted, coupled with more and more people losing their jobs, consumer spending will decline and overall trucking activity will follow.

I think the stockpiling/pandemic shopping/inventory building portion is well understood. We all have done it ourselves. However it’s the last part that I’m not sure is fully incorporated into the conventional wisdom yet. The demand shock is still reverberating and economic activity is falling. Yes, some of the spending declines are mandated. High-income households in particular are experiencing forced savings today — they cannot spend as much as they would like. However, spending will continue to fall, or at least be weak due to the recession and job and income losses. Even grocery store sales today have come back down to earth as the stockpiling portion is over.

Additionally, the forecast mentions that low oil prices will support a faster rebound in motor fuel sales, everything else being equal, when social distancing restrictions begin to lift. This is particularly timely today given the current low prices and oil futures that are even trading at negative prices!

Finally, along with reduced traffic volumes, we do see things like increased driving speeds, less congestion, fewer car crashes and the like. The table below shows that driving speeds in the Portland region are at or near posted speed limits today, even during rush hour. The following graph shows the steep drop in car crashes this year (dark blue) compared with last year (light blue).

As an aside: our advisors mentioned that these are the outcomes you would expect when demand is restricted, although today demand is forced lower via a pandemic and social distancing, whereas normally this discussion surrounds tolls and getting the prices and incentives properly aligned, but I digress.

Note that the last chart on crashes comes from a different set of new, weekly reports from ODOT that includes lots of detailed information on volumes, crashes, travel times and the like across different segments of the Portland region’s highway system (I-5 northbound, OR-217, etc). For example travel times are down 50-60% at the Wilsonville reader board.

All told, these new reports from ODOT confirm what we would expect. Social distancing measures are designed to suppress the spread of the virus. They only work insofar as Oregonians follow both the spirit and letter of the policies. Thanks to the good work ODOT is doing reporting their data, it does look like Oregonians are holding up their end of the bargain to date.