Rail Traffic Continues to Point to Economic Strength

No downturn in Warren Buffett’s favorite economic indicator….Rail traffic has now reached its highest 12 week moving average since 2011.  With a weekly intermodal reading of 10.5% year over year the 12 week moving average is now at 6.75%.   Here’s more via AAR:

 The Association of American Railroads (AAR) today reported that U.S. monthly rail traffic showed mixed results in February, and gains in both carloads and intermodal traffic for the week ending March 2, 2013.

Intermodal traffic in February 2013 totaled 983,078 containers and trailers, up 10.5 percent (93,231 units) compared with February 2012. That percentage increase represents the biggest year-over-year monthly gain since December 2010. The weekly average of 245,770 intermodal units in February was the highest weekly average for any February in history.

“Rail intermodal traffic continues to grow.  In February, year-over-year intermodal volume on U.S. railroads rose for the 39th straight week, and February saw the first double-digit year-over-year increase in two years,” said AAR Senior Vice President John T. Gray.  “Shippers find intermodal appealing for a lot of reasons, including fuel savings, higher trucking costs, and service that has become much better in recent years.”

For the first nine weeks of 2013, U.S. railroads reported cumulative volume of 2,453,447 carloads, down 4 percent from the same point last year, and 2,151,708 intermodal units, up 7.6 percent from last year. Total U.S. traffic for the first nine weeks of 2013 was 4,605,155 carloads and intermodal units, up 1.1 percent from last year.

Chart via Orcam Investment Research:

 Source: AAR

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.

More Posts - Website

Follow Me:
TwitterLinkedIn

  • Will

    Tom Brown – not sure how to get in touch with you – but thanks a lot for those examples. Very helpful.

    Cullen – you’ve attracted some smart people on the blog. Good work. Hoya Saxa.

  • Tom Brown

    Ah, great to hear Will! Thanks for the feedback.

  • http://highgreely.com John Daschbach

    For better or worse, most everything is flat or depressed from the AAR detail except Petroleum and Petroleum Products which are up 60% to 70% depending on time frame for comparison (from https://www.aar.org/newsandevents/Freight-Rail-Traffic/Documents/2013-03-07-railtraffic.pdf)

    In the long term macro sense, increased extraction of finite resources, is not net long term positive unless the loss of real finite resources is compensated by future growth in other areas. If you spend some of the bounty of consuming real resources on research developing the next resource you may come out ahead. If you spend the bounty on non-productive consumption of real resources and labor from other countries you will come out behind.

    Some of our history of resource extraction is different. From the great social resources of the towns in the Iron Range, to Land Grant universities in the midwest and west, our history has been far more support for the future from the present bounty.

    Right now I don’t see the petroleum binge as being a long term benefit for the US.

    -John

  • Gary

    Cullen,

    Does this include heavy crude moved by rail or not? Due to the logjam in the Midwest and the resulting differential between WTI and Brent, I’ve heard that it is now cost effective to move oil by rail in the US.

    Regards,
    Gary

  • KB

    The intermodal strong trend is very interesting indeed. Retail sales and general economy expansion do not support such growht. Shift from trucks to rail has probably minor effect, if any. Maybe recent build-up in wholesale inventories played some role in the recent streght.
    Cullen, if you have any insight into this matter, please, share it with us.

  • Steve W

    Is it really Buffett’s favorite economic indicator? I just read (via Mosler’s site) some of what Auchuthan (of the ECRI) said on Bloomberg about his recession call. Check it out. I wonder what he thinks about the rail freight trend.

    He seems to be convinced that such sluggish growth (sub 2%) can only mean recession. In fact, he says in 65 years, any time there’s been sub 3.7% (unless that’s a typo) GDP growth, we’ve been inside a recession.

    I would say to him: just because it happened that way every time in 65 years does not mean it has to happen that way again. Time will tell.

  • SS
  • Alexander Zayachkov

    Is there a break-our of how much inter-modal transport is Oil from the shale fields that has to be shipped rather than piped? It seems to me with inventories forced into rail transport, the overall rail stats may be skewed by oil shipments.
    Thanks,
    A7

  • Alexander Zayachkov

    Corrected:
    Is there a break-out of how much inter-modal transport is Oil from the shale fields that has to be shipped rather than piped? It seems to me with inventories forced into rail transport, the overall rail stats may be skewed by oil shipments.
    Thanks,
    A7

  • inDC

    Cullen — There are some very valid posts here noting the large increase in petroleum traffic is skewing the weekly intermodal, yet you have refrained from posting anything in response. Considering this reading is one use to assess overall economic health, should you reconsider your reliance on this? Can you at least comment on how the intermodel should be read/taken in light of the petroleum traffic?

  • AWF

    My own Rail Indicator bottomed at the end of February and a tick up the 1st week in March.–what is important is that this tick up is coming about a 6-8 wks early from previous yrs
    Consider : “1 robin don’t make a spring”
    Why would this be of concern?–it seems that the intermodel traffic out of LA and Seattle ship yards are not confirming-and my truckometer out of Houston is flat to miniscule up.
    What is of Note is that 2 mothers truckers are doing well in Intermodal JBHunt(Houston) and Swift Transports–These 2 companies are far ahead of there competitors in Intermodel freight transport
    What is of note: Both KSU and UNP and both dominate in Intermodal rail traffic
    Needless th say all 4 companies are part of the “Dow Transports”

    Consider the “Dow Theory”
    The simple part is the confirmation of the “Averages”
    The important part that is forgotten is the “Total shippment of Goods”

    From :Railtime indicators
    For the first nine weeks of 2013, U.S. railroads reported cumulative volume of 2,453,447 carloads, down 4 percent from the same point last year,

    and 2,151,708 intermodal units, up 7.6 percent from last year.

    “Total U.S. traffic for the first nine weeks of 2013 was 4,605,155 carloads and intermodal units, up 1.1 percent from last year.”

    Lets not get to crazy about these numbers!