Wells Fargo Securities Economics Group: Watching The Rails For Clues On 2nd Half Economic Growth
Area Development Online News Desk (08/27/2012)
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
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.