Area Development
Source: Wells Fargo Securities Economics Group

Railcar Data Suggest Industrial Activity is Moderating
While the weekly railcar data do not get as much respect as they used to, the report still provides a great deal of insight into current economic conditions. This is particularly true in the current environment, where industrial activity, energy exploration and international trade have accounted for a disproportionate share of economic growth. The recent shift in the economic winds, with global growth slowing and homebuilding gaining strength, is readily apparent in the railroad data.

Overall railcar shipments have increased 1.2 percent over the past year, continuing a recent deceleration consistent with the slowdown in the global economy. Intermodal traffic is up 4.6 percent year-over-year, with container traffic up 6.4 percent and trailer traffic down 9.3 percent. Container traffic, which accounts for 90 percent of intermodal freight, has moderated significantly since late June, when it was up 10.4 percent yearover- year. The slowdown likely reflects some weakening in international trade that is not yet apparent in the merchandise trade figures.

Outbound containers from the Port of Los Angeles/Port of Long Beach, which is the nation's largest container port, show loaded outbound container volume declining slightly in July. Data from other key container ports, such as New York/New Jersey and Savannah, also show some moderation in exports. Inbound volumes appear to have held steady in July, which means most of the slowing in intermodal traffic is tied to weakening exports. The continued slide in the railroad container volumes suggest these trends continued in August.

Shipments of motor vehicles have also moderated, slowing from year-togrowth of more than 20 percent earlier this year to only 10.7 percent just recently. The moderation reflects some slowing in domestic sales and exports.

On the plus side, the energy boom continues to fuel strong gains in shipments of petroleum products, which are up 42.4 percent over the past year. While the volume of petroleum shipped by rail is relatively small, the growth in new energy plays, like the Bakken shale in North Dakota and natural gas plays in other parts of the country, has also bolstered demand for crushed stone and chemicals which are also shipped by rail. The impact of the drought is not yet apparent in the railcar data. Shipments of grains are up 2.9 percent year-to-year and shipments of other farm products are up 6.1 percent. Shipments have been bolstered by low water levels on the Mississippi River, which diverted some barge traffic.

The most dramatic turnaround in railroad traffic has been in shipments of lumber, which have gained momentum over the past year and are currently up 16.1 percent. The increase reflects gains in homebuilding. The leading states for lumber shipments are Oregon, Washington, and South Carolina.