Written by Steven Hansen
Econintersect publishes Association of American Railroads (AAR) weekly traffic reports on Thursdays, and this post provides a monthly overview showing rail movements for May 2012 compared to May 2011. Coal is screwing up analysis of rail data, and this post explains why. The transport portion of the economy is showing the real economy is expanding around 3%.
- carloads down 2.8% year-over-year (compared to down 5.5% last month)
- intermodal (containers or trailers on railcars) up 3.5% year-over-year (compared to up 3.6% last month).
- total carloads plus intermodal down 0.0% year-over-year (compared to down 1.5% last month).
Econintersect uses rail movements to add to understanding of economic dynamics in coming months. As long as growth remains positive, it bodes well for a positive economic outlook.
As coal comprises well over 40% of all commodities transported, and coal has major demand fluctuations unassociated with the economy – the below graph removes coal from the equation – and shows a 3.2% gain year-over-year.
This month the AAR included the following graphic which pretty well summarizes why Econintersect continues to pull coal out of the rail transport numbers as it is screwing with interpretation of the economic intuitive elements of rail transport:
And again to emphasize why Econintersect spends so much effort analyzing rail transport:
Freight railroading is a “derived demand” industry: demand for rail service occurs as a result of demand elsewhere in the economy for the products railroads haul. Thus, rail traffic is a useful gauge of broader economic activity especially of the “tangible” economy.
The graphic below compares non-seasonally adjusted total rail movements (including coal) year-over-year.
Most finished consumer goods which travel on rail move in intermodal units, containers and trailers, on rail cars. If there was only one pulse point to watch – it is this one. It shows positive (and weak) year-over-year growth. A caveat here: this needs to be viewed with trucking data to get a complete picture – as this same service is provided by both modes of transport.
Rail is one of the first reporters of May 2012 data. So far other major transport indicators are mixed but the transport data overall is showing weak growth:
- Truck Transport (April 2012): Up 3.5% year-over-year
- Rail (April 2012): Down 1.5% year-over-year (without coal up 3,2%)
- Rail (May 2012): Down 0.0% year-over-year (without coal up 4.2%)
- Container Counts (April 2012): exports decreased 1.0%, while imports increased 2.8%
For container counts, only import counts are economically intuitive. Using transport as an economic barometer – the real economic growth in the USA is around 3%.