Rail Data in October 2012 Shows Economy Is Softening

Written by Steven Hansen

The October 2012 rail data overall trend shows transport is weakening. Even the growth in intermodal traffic continues to show lower growth, and is no longer growing at a record pace.

….. Intermodal volume in October averaged 246,695 units per week, second only to June for the year. For the year-to-date, intermodal volume is up 3.5% (348,709 containers and trailers) over the same period in 2011 and is just 0.1% behind 2006’s record pace.

This is the third month of soft rail data, and is considered a trend. Overall, the October monthly summary data says:

  • carloads down 6.1% year-over-year (compared to down 2.5% last month)
  • excluding coal and grain (which are not economically intuitive), carloads were up 3.4% year-over-year.
  • intermodal (containers or trailers on railcars) up 1.5% year-over-year (compared to up 2.5% last month).
  • total carloads plus intermodal down 2.7% year-over-year (compared to down 0.9% last month).

The Association of American Railroads (AAR) reports this data in three parts:

  • railcars
  • 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 possible economic dynamics in coming months – as rail movements come months before retail sales. In any analysis, several good conclusions can be cut from the same data set. Overall, there is no question that rail is now saying the economy is softening.

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 and grain from the equation.

Removing coal and grain, one could draw a conclusion that the industrial portion of the economy growth is flat or constant – the rate of growth is unchanging. From the AAR report:

Coal carloads were down 16.0% (108,210 carloads) in October 2012 from October 2011. Coal averaged 113,600 carloads per week in October 2012, the lowest weekly average in five months.

To show the decline in coal production in the USA, below is the current chart from the Energy Information Administration (EIA) showing that coal production is down 6.2% year-to-date and 10.8% same period 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. Here we see a four month down trend – and my conclusion is the consumer portion of the economy is cooling off:

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:

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.

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