Written by Steven Hansen
Not only has coal been screwing up analysis of rail data, this month we can add grain to the list. The transport portion of the economy is showing the real economy is expanding at least 3%.
- carloads down 1.3% year-over-year (compared to down 2.8% last month)
- excluding coal and grain (which are not economically intuitive), carloads in June 2012 were up 4.2% year-over-year and their highest since August 2008.
- intermodal (containers or trailers on railcars) up 5.2% year-over-year (compared to up 3.5% last month). That’s the highest average for any June in history and the third highest average for any month in history (behind August 2006 and October 2006).
- total carloads plus intermodal up 1.6% year-over-year (compared to down 0.0% last month).
Econintersect publishes Association of American Railroads (AAR) weekly traffic reports on Thursdays (sometimes late when the author is traveling), and this post provides a monthly overview for the month of June 2012.
The Association of American Railroads (AAR) reports this data in three parts:
- intermodal (sea containers or trailers on special railcars)
- total railcars plus intermodal
AAR rail traffic data are reported as carloads or as intermodal units. Carload traffic is classified into one of 20 different commodity categories and is carried in a variety of rail car types (e.g., tank cars, covered hoppers, gondolas, boxcars, etc.). A unit of rail intermodal traffic is either a shipping container (currently about 87% of U.S. rail intermodal traffic) or a truck trailer (about 13%) carried on a railroad flat car. Intermodal is not included in carload figures. Commodity detail on the freight inside the container or trailer is not available.
Econintersect uses rail movements to add to understanding of economic dynamics in coming months – as rail movements come months before retail sales. As long as growth remains positive, it bodes well for a positive economic outlook. From a past AAR report:
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.
As coal and grain comprises well over half of all commodities transported, and coal / grain have major demand fluctuations unassociated with the economy – the below graph removes coal from the equation – and shows a 4.2% gain year-over-year. Some quotes from the June 2012 report:
… We’ve noted in the past that one of the major reasons for the decline in U.S. grain carloads is lower U.S. grain exports, and that continues to be the case ….
… It’s been so bad for coal lately, though, that a 6.2% decline sounds pretty good. The very hot weather that plagued much of the country in recent weeks wasn’t welcome in many places, but it will result in higher coal traffic than would otherwise be the case ….
This month the AAR report included a deeper look at intermodal and stated:
Today, U.S. rail intermodal traffic is roughly 55% international traffic (exports and imports) and 45% domestic traffic. The share of total U.S. rail intermodal movements accounted for by domestic movements has been rising in recent years, with much of the increase consisting of traffic that used to move solely by truck but which has been converted to rail movements (though usually with truck on one or both ends). In other words, rail’s market share has probably been rising.
Econintersect only reports on sea containers from the Ports of LA and Long Beach as data reporting lags real time by a half of a month. This graphic if for the seven major ports which lags real time by over two months:
The graphic below compares non-seasonally adjusted total rail movements (including coal and grain) 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. 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 June 2012 data. So far other major transport indicators are mixed but the transport data overall is showing weak growth:
- Truck Transport (May2012): Up 4.1% year-over-year
- Rail (May 2012): Down 0.0% year-over-year (without coal up 4.2%)
- Rail (June 2012): Up 1.6% year-over-year (up well over 4% excluding coal & grain)
- Container Counts (May 2012): exports unchanged year-over-year, while imports are down 2.5%
For container counts, only import counts are economically intuitive. Using transport as an economic barometer – the real economic growth in the USA is at least 3%.