Rail Week Ending 09 September 2017: Intuitive Sector Decline Continues

Week 36 of 2017 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. The economically intuitive sectors are in contraction.

Analyst Opinion of the Rail Data

This week rail continued to be impacted by Hurricanes Harvey and Irma.

We review this data set to understand the economy. If coal and grain are removed from the analysis, this week it contracted 4.4 % (meaning that the predicitive economic elements declined year-over-year). Also consider total rail movements are below 2015 levels - even though they are above 2016 levels. This week the one year rolling averages continue in expansion for the 14th week after contraction beginning in late 2015.

The strength this week again was intermodal - which is economically positive (and is contrary to the slowness of the economically intuitive carload counts).

The following graph compares the four week moving averages for the rail economically intuitive sectors (red line) vs. total movements (blue line): Rail's intuitive sectors have been bouncing around the zero growth line for most of 2017 remained below the zero growth line for the eighth week.

(Click on image to enlarge)

This analysis is looking for clues in the rail data to show the direction of economic activity - and is not necessarily looking for clues of profitability of the railroads. The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages (carloads [including coal and grain] and intermodal combined).

A summary of the data from the AAR:

For this week, total U.S. weekly rail traffic was 486,474 carloads and intermodal units, up 0.8 percent compared with the same week last year.

Total carloads for the week ending September 9 were 247,930 carloads, down 1.9 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 238,544 containers and trailers, up 3.6 percent compared to 2016.

Three of the 10 carload commodity groups posted an increase compared with the same week in 2016. They were coal, up 5,322 carloads, to 92,488; metallic ores and metals, up 1,944 carloads, to 21,549; and chemicals, up 952 carloads, to 29,024. Commodity groups that posted decreases compared with the same week in 2016 included grain, down 5,146 carloads, to 17,445; petroleum and petroleum products, down 2,518 carloads, to 7,930; and nonmetallic minerals, down 1,894 carloads, to 33,506.

For the first 36 weeks of 2017, U.S. railroads reported cumulative volume of 9,310,027 carloads, up 4.4 percent from the same point last year; and 9,590,652 intermodal units, up 3.4 percent from last year. Total combined U.S. traffic for the first 36 weeks of 2017 was 18,900,679 carloads and intermodal units, an increase of 3.9 percent compared to last year.

Coal is over 1/3 of the total railcar count, and this week the EIA says coal production is 1.5 % higher than the production estimate in the comparable week in 2016.

The middle row in the table below removes coal and grain from the changes in the railcar counts as neither of these commodities is economically intuitive.

(Click on image to enlarge)

 

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For the week ended September 9, 2017

• Estimated U.S. coal production totaled approximately 15.7 million short tons (mmst)
• This production estimate is 4.5% lower than last week's estimate and 1.5% higher than the production estimate in the comparable week in 2016
• East of the Mississippi River coal production totaled 5.9 mmst
• West of the Mississippi River coal production totaled 9.8 mmst
• U.S. year-to-date coal production totaled 548.2 mmst, 13.5% higher than the comparable year-to-date coal production in 2016

Coal production from EIA.gov