Written by Steven Hansen
Depending on how you view the data, using rail to analyze the economy presents a mixed picture in December 2012. Rail becomes a transporter of commodities early in the manufacturing cycle, and its intermodal movements (usually finished manufactured goods) can be used to project economic activity up to three months in advance.
- intermodal growth has been very sluggish for the last 3 months with a flat growth trend under 2%;
- commodities (excludng coal and grain) have a short term improving trend, and a long term declining trend.
Commodities have been effected by coal and grain.
The big declines in coal and grain carloads in 2012 are obviously a serious concern to railroads, but from the standpoint of the health of the economy, the declines are less problematic because coal and grain carloads often rise or fall for reasons that have little to do with the state of the economy. The decline in coal carloads in 2012 was predominantly due to reduced demand from coal-fired power plants because of lower natural gas prices (which make electricity generated from natural gas more competitive) and more stringent environmental regulations. For grain, carloads were down in 2012 in part because U.S. grain exports were down and in part because the severe drought in the summer significantly reduced grain production. In other words, don’t assume that lower total U.S. rail carloads in December 2012 or the full year 2012 necessarily signal a weak or weakening economy.
Here is what the charts tell us if we view commodity transport with coal and grain included:
Here is an AAR chart which excludes coal and grain:
And here is how the trends play out (commodities plus intermodal).
|Trends||w/grain and coal||w/o grain and coal|
|4 week average||declining||improving|
|13 week average||declining, less bad||improving|
|52 week average||declining||declining|
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. Here we see a six month down trend, or a three month flat trend – and my conclusion is the consumer portion of the economy has cooled:
Overall, the December monthly summary data says:
- carloads down 4.2% year-over-year (compared to down 4.0% last month)
- excluding coal and grain (which are not economically intuitive), carloads were up 6.0% year-over-year (compared to up 5.5% last month).
- intermodal (containers or trailers on railcars) up 1.7% year-over-year (compared to up 1.2% last month).
- total carloads plus intermodal down 1.7% year-over-year (compared to down 1.7% last month).
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.
Rail is among the first reporters of October 2012 data. So far other major transport indicators are mixed but the transport data overall is showing weak growth:
- Truck Transport (October 2012): Up 3.7% month-over-month, down 2.1% year-over-year (Hurricane Sandy after effect)
- Rail (November 2012): Down 1.7 % year-over-year
- Rail (December 2012) Down 1.7% year-over-year
- Container Counts (November 2012): data was strike affected and not comparable.
For container counts, only import counts are economically intuitive. Using transport as an economic barometer – the real economic growth in the USA continues to be barely positive, although there are positive signs of improving growth.