July 2011 Rail Counts Show Slowing Economy In Months to Come

Rail traffic in July 2011 continues to degrade year-over-year, and now is literally showing no growth over 2010. Econintersect believes transports are the window into the economy.

Note: The above graph was provided by the Association of American Railroads and does not include the downward revision for 1Q/2011 GPD. The revision does not change the direction of the trend lines or my conclusions.

The graphic below shows the total traffic on the USA rails – with terrible trend lines. Trend lines are important to understanding the future.

Does this mean economically the economy has stalled? Not altogether – The two major reasons for this collapse of growth are coal and grains.

Coal, because the majority of use is in power production in plants which can use alternative fuels, is not an economic indicator. Neither is grains as movements are more of an indication of crop yields or export demand. Food staples are not economic indicators. Interpreting the above chart with more positive trend lines would indicate the economic soft spot is ending.

Most finished consumer goods which travel on rail move in intermodal units – containers and trailers on railcars.

Here, the trend lines are very negative. Also consider that exports and imports of consumer goods mostly travel in intermodal units. This is forewarning for August and September – less consumer goods were moved to stores.

It is also the first indication that the green shoot of improving exports likely will be less good in July.

Overall, Econintersect sees a mixed message in the rail data. Definitely the “less good” consumer related rail movements raises alarm bells.

Related Articles:

Diesel Use Rises in June 2011, But Suggests 2Q2011 GDP of 1.8% by Steven Hansen

Container Traffic Continues Growth in May 2011 by Steven Hansen

Trucking Tonnage Down 2.3% in May 2011 by GEI News