Rail traffic has remained a superb indicator over the course of the last 6 months and it’s been at least partially influential in my thinking that we were not headed for imminent recession (a call made 2 quarters ago).  The latest data from the AAR continues to confirm this outlook.  Year-end readings are always a bit bumpy due to the seasonal oddities that occur around the holidays and the new year, but the data is still telling a positive story.  Via the AAR:

“The Association of American Railroads (AAR) today reported gains in 2011 rail traffic compared with last year, with U.S. railroads originating 15.2 million carloads, up 2.2 percent over 2010 and up 9.7 percent over 2009. Total U.S. rail intermodal volume in 2011 was 11.9 million trailers and containers, up 5.4 percent over 2010 and up 20.4 percent over 2009.

In 2011, 14 of the 20 carload commodity categories tracked by AAR saw increases on U.S. railroads compared with 2010 indicating a broad recovery across industry sectors. The largest gains were: metallic ores, up 20.5 percent or 67,631 carloads; primary metal products, up 12 percent or 56,988 carloads; and petroleum products, up 11.1 percent or 36,811 carloads. The commodity with the biggest carload decline in 2011 from 2010 was grain, down 27,946 carloads or 2.4 percent.

“A good beginning, some uncertainness in the middle, and then a good ending—that describes U.S. rail traffic in 2011,” remarked John Gray, AAR’s Senior Vice President for Policy and Economics. “We continue to see hopeful economic signs, as the industry prepares for 2012.”

AAR also announced gains in December 2011 rail traffic, with U.S. railroads originating 1,134,580 carloads, up 7.3 percent over December 2010, which is the largest year-over-year monthly increase since January 2011. U.S. rail intermodal originations totaled 873,390 containers and trailers, up 9.4 percent over December 2010. This is the second-highest monthly intermodal average for any December in history.

During December 2011, 16 of the 20 carload commodity categories tracked by the AAR saw increases compared with December 2010.

AAR reported gains in weekly rail traffic for the week ending December 31, 2011, with U.S. railroads originating 245,666 carloads, up 1.9 percent compared with the same week last year. Intermodal volume for the week totaled 181,217 trailers and containers, up 8.6 percent compared with the same week last year.

Ten of the 20 carload commodity groups posted increases compared with the same week in 2010, including: crushed stone, sand and gravel, up 35.2 percent; waste and nonferrous scrap, up 23.8 percent, and metals and products, up 15.7 percent. The groups showing a decrease in weekly traffic included: farm products, excluding grain, down 7.6 percent; primary forest products, down 6.5 percent, and food and kindred products, down 6.1 percent.

Weekly carload volume on Eastern railroads was down 5.3 percent compared with the same week last year. In the West, weekly carload volume was up 6.1 percent compared with the same week in 2010.

For the 52 weeks of 2011, U.S. railroads reported cumulative volume of 15,155,992 carloads, up 2.2 percent from last year, and 11,892,431 trailers and containers, up 5.4 percent from last year.”

Source: AAR


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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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  • Alex H

    Why do you say there is ‘no recession here’, but you state we are in a balance sheet recession in other posts? Do you mean ‘recession’ as defined by 2 qtr negative GDP growth? Also, does this mean that although rail traffic is expanding, it is expanding below trend according to the BSR theory?

  • http://www.pragcap.com Cullen Roche

    Well, there’s no “technical recession” as the NBER would measure it. Or negative growth…the BSR is a theory. One that’s not widely accepted. My outlook has been that the USA would sort of muddle along with below trend growth as de-leveraging occurs and the govt runs large enough deficits to offset the impact. So far, that’s been right. What I have said is wrong, is this idea that we’re sinking into a new negative growth phase….Sorry I haven’t been more clear about that….

  • LRM

    I don’t know much about this index. I have posted it here before after someone else pointed it out to me

    It still seems to be in decline and it would be nice to see it turn up or level off at least. When The rail index is posted it reminds me to check it once in a while!!

  • Imtheknife

    Wondering if any of this rail traffic could be due to losses in truck-based shipping, because of the difference in price between diesel and gasoline?

  • Andrew P

    If the EU is going into recession (as they seem to be), how long does that slowdown take to show up in US rail traffic?

  • Skateman

    This has been my thought as well.

  • Octavio Richetta

    ECRI’s LA steady on recession watch. wli and it’s GR down for the week (last week since the data realized is always for the previous week) http://www.businesscycle.com/news_events/news_details/3112

    Dough Short has an interesting analysis of ECRI’s recession call. http://advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php with links to other analyses. LA’s strong unambiguous calls means he is betting the reputation of the institution on this call. Which of course does not mean he will necessarily be right.

  • Stakeholder

    Intermodal rail traffic is positively linked to imports. Taken positively, Americans are spending again. On the other hand, imported products do not always translate into jobs for Americans.

  • Sparkle

    By just about every measure you care to analyse: consumer spending, factory orders, ISM data, jobless claims the US economy is showing signs of strength. Even housing looks like it may be stabilizing.

    Back in November ECRI came out ans stated the US economy was already in recession. Since then (as this is patently not the case) they’ve back tracked and said they expect a recession no later than by the end of H2.

    I can’t wait to see if Laksman “we’ve-never-been-wrong” Achuthan still has his smug attitude next time he appears on TV. On the evidence of his recent calls the CNBC journalists were absolutely right to give him a roasting;