Week 21 of 2020 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. Total rail traffic has been mostly in contraction for over one year - and now is taking a hit from coronavirus. The carloads intuitive sector's rolling average again worsened this week and now is historically low. Intermodal has a serious contraction due to the logistic headwinds of the coronavirus.

Analyst Opinion of the Rail Data

Intermodal and carloads are under Great Recession values. Whilst container exports from China are now recovering, container exports from the U.S. continues to slow. The rate of growth of rail had been improving before the coronavirus (even though it was in contraction) - and now the coronavirus is driving rail deeper into contraction. The effects of coronavirus will continue to slow rail.

The AAR thinks they see some signs of improvement - but I need to see a clear sign above the normal volatility of rail.

We review this data set to understand the economy. The intuitive sectors (total carloads removing coal, grain, and petroleum) contracted 21.2 % year-over-year for this week [22.8 % for previous week]. We primarily use rolling averages to analyze the intuitive data due to weekly volatility - and the 4 week rolling year-over-year average for the intuitive sectors declined from -21.5 % to -21.7 %.

When rail contracts, it suggests a slowing of the economy.

The following graph compares the four-week moving averages for carload economically intuitive sectors (red line) vs. total movements (blue line):

Intermodal transport (containers or trailers on rail cars) growth was weak and in contraction in 2019.

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 the 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 for this week from the AAR:

For this week, total U.S. weekly rail traffic was 428,715 carloads and intermodal units, down 19.2 percent compared with the same week last year.

Total carloads for the week ending May 23 were 190,639 carloads, down 27.5 percent compared with the same week in 2019, while U.S. weekly intermodal volume was 238,076 containers and trailers, down 11.2 percent compared to 2019.

None of the 10 carload commodity groups posted an increase compared with the same week in 2019. Commodity groups that posted decreases compared with the same week in 2019 included coal, down 32,660 carloads, to 46,863; motor vehicles and parts, down 12,171 carloads, to 4,874; and metallic ores and metals, down 8,733 carloads, to 14,805.

"Of the 20 carload categories we track, 15 had modestly higher loadings last week than the week before, led by motor vehicles and grain. Meanwhile, intermodal originations were higher last week than in any of the previous 11 weeks. While we can't yet say whether rail traffic and, by extension, the economy, have turned a corner, these are all encouraging signs," said AAR Senior Vice President John T. Gray. "As areas across the country begin to reopen over the next several weeks, perhaps we can start looking for light at the end of what has become a rather long tunnel. Whatever the outcome, railroads will do their part to get us out of the tunnel safely and reliably."

For the first 21 weeks of 2020, U.S. railroads reported cumulative volume of 4,533,784 carloads, down 14.3 percent from the same point last year; and 4,970,889 intermodal units, down 11.3 percent from last year. Total combined U.S. traffic for the first 21 weeks of 2020 was 9,504,673 carloads and intermodal units, a decrease of 12.8 percent compared to last year.

The middle row in the table below removes coal, grain, and petroleum from the changes in the railcar counts as these commodities are not economically intuitive.

[click on the graph below to enlarge]