Rail Carload Volumes Still Down, but Improving

The Association of American Railroads (AAR) has reported that November freight rail carloadings were down 8.2% compared with the same month last year and down 17.4% compared with November of 2007. However, if Thanksgiving week were excluded, November would have been the highest volume month of the year for U.S. railroads.

While rail carloads are still down overall, December’s Rail Time Indicators report illustrates that the recovery in U.S. manufacturing seems to be continuing. The Purchasing Managers Index (PMI), which measures how U.S. manufacturing is faring, was at 53.6 in November. A PMI over 50 is thought to indicate growth in the manufacturing sector. If manufacturing is growing, improvement in rail carloads of raw materials, like chemicals and steel which are used in the production of goods, could be seen next month.

U.S. rail intermodal traffic was down 6.7% compared with November 2008, and down 14.1% compared to November 2007. Consumer confidence rose to 49.5 in November 2009 from 48.7 in October 2009. Since much of rail intermodal traffic consists of consumer goods, the strong positive correlation between consumer confidence and consumer spending indicates that rail intermodal traffic could increase in the coming months should consumer confidence continue to trend upward.

“November's traffic numbers, when considering the effect of the Thanksgiving week, are generally positive,” says John Gray, AAR’s senior vice president of policy and economics. “Rail traffic is still down significantly in comparison to 2007 numbers, but the economic indicators in December's report lead us to believe that our nation's economy continues to improve.”