April Caps Off Continuing Weak Rail Trends

April rail trends finished with a whimper as intermodal rail traffic came in at 1.6% on a year over year basis.  This continues a series of weakening data points as the Q2 period begins.  After a very healthy 3 month average reading of 5.3% in Q1, the second quarter is off to a very sluggish start with a 0.38% average reading.  The most recent reading brings the 12 week trailing average to 3.54% which is the weakest reading since January.

Here’s more from AAR:

“The Association of American Railroads (AAR) today reported that U.S. monthly rail traffic showed mixed results in April 2013, and traffic was also mixed for the week ending April 27, 2013.

Intermodal traffic in April 2013 totaled 962,019 containers and trailers, up 1.6 percent (15,053 units) compared with April 2012. April’s weekly average of trailers and containers, 240,505, was the highest for any April in history.

Carloads originated in April 2013 totaled 1,108,722, down 0.4 percent (4,640 carloads) compared with the same month last year.

Nine of the 20 major commodity categories tracked on a monthly basis by AAR saw year-over-year increases in April 2013 over April 2012. Commodities with the biggest carload increases in April included petroleum and petroleum products, up 46.4 percent or 17,524 carloads; crushed stone, gravel and sand, up 11.5 percent or 8,959 carloads; motor vehicles and parts, up 5.9 percent or 3,868 carloads; and coke, up 10.1 percent or 1,359 carloads.”

Chart via Orcam Investment Research:

rails

Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Back in April of last year you said your model was calling for a recession Q2 2013. Now we are here. Rail traffic being so close to contraction going into summer is scary, gas prices will likely go up again and consumers will tighten. Maybe the call will only be a quarter or two off.

    http://pragcap.com/still-no-recession-on-the-horizon

    • I’ve updated that “call” several times in the quarters since then. My models don’t accurately predict more than about a quarter out so they require quarterly updates (especially since some components embed volatile data like the substantial decline in the deficit which didn’t materialze as many expected). I do NOT see a recession starting in Q2 of this year.

  2. Well, give Cullen some credit. He is willing to update his views. Better than to try to fit a square through a circle, like the folks at ECRI(Lakshmi Achutuan).

    Nevertheless, I think the rail traffic is troubling. It could be easier to explain away if, say, oil production was slowing or falling but it is still rising.

    But either way, it’s just one data point. We shouldn’t look at the recent employment improvements, however, and think we’re safe.

    Employment is always a lagging indicator and I’d say we have a bigger chance of a recession in 2013 and 2014 than we had before in part because it’s been almost 7 years now, so it’s time, and there’s a general feeling of neglect. Nobody much attention to the recession possibility anymore.

    Remember, we had positive growth by 3% of GDP two quarters into the recession last time.

    This datapoint isn’t sufficient on its own but it deserves to be taken seriously.

    • Well said. I’m concerned too. This may prove to be the longest “muddle through”, sluggish economic period in our lifetimes — and that might not be all bad if it meant more productive (nonspeculative) private credit expansion. (I’m thinking about CR’s point the other day about margin debt not being the kind of credit expansion we’d prefer.)