Written by Steven Hansen
Week 31 of 2019 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The economically intuitive sectors rolling averages remain in contraction – and marginally improved.
Analyst Opinion of the Rail Data
We review this data set to understand the economy. The intuitive sectors (total carloads removing coal, grain, and petroleum) contracted 5.2 % year-over-year for this week. We primarily use rolling averages to analyze the intuitive data due to weekly volatility – and the 4 week rolling year-over-year average for the intuitive sectors marginally improved from -4.2 % to -3.6 %.
When rail contracts, it suggests a slowing of the economy.
The following graph compares the four-week moving averages for carload economically intuitive sectors (red line) vs. total movements (blue line):
Intermodal transport (containers or trailers on rail cars) growth was relatively strong until the beginning of 2019 – and now the year-to-date growth is deep in contraction.
This analysis is looking for clues in the rail data to show the direction of economic activity – and is not necessarily looking for clues of profitability of the railroads. The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages (carloads [including coal and grain] and intermodal combined).
Percent current rolling average change from the rolling average of one year ago | Trend Direction | |
4 week rolling average | -5.0 % | improving |
13 week rolling average | -5.4 % | slowing |
52 week rolling average | -1.3 % | slowing |
A summary for this week from the AAR:
U.S. railroads originated 1,264,100 carloads in July 2019, down 4.8 percent, or 64,406 carloads, from July 2018. U.S. railroads also originated 1,314,333 containers and trailers in July 2019, down 6.1 percent, or 84,878 units, from the same month last year. Combined U.S. carload and intermodal originations in July 2019 were 2,578,433, down 5.5 percent, or 149,284 carloads and intermodal units from July 2018.
In July 2019, six of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with July 2018. These included: petroleum & petroleum products, up 6,465 carloads or 11.5 percent; all other carloads, up 2,866 carloads or 9.9 percent; and metallic ores, up 2,456 carloads or 7.7 percent. Commodities that saw declines in July 2019 from July 2018 included: coal, down 43,954 carloads or 10.3 percent; crushed stone, sand & gravel, down 6,350 carloads or 5.1 percent; and primary metal products, down 4,884 carloads or 9.9 percent.
“Rail traffic in July, as in many other recent months, was held back by declines in three of the largest rail traffic segments, coal, grain, and intermodal,” said AAR Senior Vice President of Policy and Economics John T. Gray. “Despite a summer heat wave of historical proportions, very low prices for natural gas have seriously weakened the seasonal demand for coal-generated electrical power. These same low natural gas prices appear to have allowed chemical production to pretty much hold steady even in the face of the uncertainty around foreign trade which has been the source of much of the recent growth in chemical production. With fifty percent of rail intermodal business which is overseas – including international trade, both imports of consumer and intermediate manufacturing components and exports such as food products – trade policy uncertainty continues to drag down this traffic segment. Export grain movements are also facing increasingly serious headwinds from threats to trade policy stability.”
Excluding coal, carloads were down 20,452 carloads, or 2.3 percent, in July 2019 from July 2018. Excluding coal and grain, carloads were down 16,794 carloads, or 2.2 percent.
Total U.S. carload traffic for the first seven months of 2019 was 7,816,318 carloads, down 3.2 percent, or 259,574 carloads, from the same period last year; and 8,238,594 intermodal units, down 3.7 percent, or 314,125 containers and trailers, from last year.
Total combined U.S. traffic for the first 31 weeks of 2019 was 16,054,912 carloads and intermodal units, a decrease of 3.5 percent compared to last year.
Week Ending August 3, 2019
Total U.S. weekly rail traffic was 541,558 carloads and intermodal units, down 5.2 percent compared with the same week last year.
Total carloads for the week ending August 3 were 266,439 carloads, down 4.9 percent compared with the same week in 2018, while U.S. weekly intermodal volume was 275,119 containers and trailers, down 5.5 percent compared to 2018.
Two of the 10 carload commodity groups posted an increase compared with the same week in 2018. They were petroleum and petroleum products, up 1,724 carloads, to 12,561; and nonmetallic minerals, up 669 carloads, to 39,081. Commodity groups that posted decreases compared with the same week in 2018 included coal, down 9,657 carloads, to 83,676; grain, down 2,533 carloads, to 22,607; and metallic ores and metals, down 1,706 carloads, to 23,488.
The middle row in the table below removes coal, grain, and petroleum from the changes in the railcar counts as these commodities are not economically intuitive.
This Week | Carloads | Intermodal | Total |
This week Year-over-Year | -3.5 % | -5.3 % | -4.4 % |
— Ignoring coal, grain & petroleum | -1.4 % | ||
Year Cumulative to Date | -3.2 % | -3.6 % | -3.4 % |
[click on the graph below to enlarge]
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