Saturday, April 21, 2012

Non-Traditional Economic Indicator---Y'all to U-Haul...

The always insightful Carpe Diem offers underlying evidence for larger trends in the economy.  Just everyday transactions that send signals as to what is happening on a larger scale.  U-haul rental rates are one such example.  They can be a signal of migration patterns.

U-Haul has to make sure they have trucks in stock at their retail outlets around the country to meet local demand.  If people are moving from Point A to Point B in larger numbers then from Point B to Point A  there is going to be an imbalance of trucks available.  How does U-Haul resolve this?  With pricing, of course. 

Look at the following example Mark Perry uses to illustrate what is happening between California and Texas.

From Sacramento to Houston: $2,370

From Houston to Sacramento: $1,007

From San Francisco to San Antonio: $2,214

From San Antonio to San Francisco: $1,069

It is twice as expensive to move from California to Texas than vice versa---same truck, same distance.  Lots of Californians want to move to Texas but not as many want to move from Texas to California. 

This is a nice illustration of movement along the market demand curve for Rental Trucks.  In order to decrease the quantity demanded for trucks in California they increase the price. In order to increase the quantity demanded for Rental Trucks in Texas they decrease the price.  This helps keep the right number of trucks available in BOTH California and Texas.

For my new Illinois friends---here is the pricing to move from Illinois to Texas (Dallas/Ft Worth).  What does this tell you about migration patterns between the two states?

Above From Illinois TO Texas
Above From Texas TO Illinois

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