Week 14 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. The intuitive sector's rolling average worsened this week but still in the range seen over the last year. Intermodal continues to worsen due to the logistic headwinds of the coronavirus.

Analyst Opinion of the Rail Data

The big decline this week continues to be intermodal (trucks and containers on flatcars) which accounts for half of the rail traffic, Intermodal continues under 2013 levels. 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.

We review this data set to understand the economy. The intuitive sectors (total carloads removing coal, grain, and petroleum) contracted 13.3 % year-over-year for this week [12.8 % for the 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 -4.1 % to -7.7 %.

When rail contracts, it suggests a slowing of the economy. Still, the contraction is still not as great as what was seen in 2016.

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 429,095 carloads and intermodal units, down 15.9 percent compared with the same week last year.

Total carloads for the week ending April 4 were 210,911 carloads, down 16.2 percent compared with the same week in 2019, while U.S. weekly intermodal volume was 218,184 containers and trailers, down 15.7 percent compared to 2019.

Two of the 10 carload commodity groups posted an increase compared with the same week in 2019. They were miscellaneous carloads, up 1,369 carloads, to 10,336; and forest products, up 127 carloads, to 9,916. Commodity groups that posted decreases compared with the same week in 2019 included coal, down 17,587 carloads, to 57,504; motor vehicles and parts, down 14,389 carloads, to 3,171; and nonmetallic minerals, down 4,526 carloads, to 31,527.

"The impact of the novel coronavirus on railroads is growing," said AAR Senior Vice President John T. Gray. "Since 1988, when our data begin, total U.S. rail carloads were lower than they were last week only during a few Christmas and New Year's weeks, when rail operations are seasonally low. Part of the problem now is sustained weakness in coal carloads, but even excluding coal, carloads last week were down 13.1%. We haven't seen sustained declines of that magnitude since the Great Recession. The worst performing commodity category last week was autos and auto parts, with North American carloads down 84% from what they were just three weeks ago. It wasn't just autos, though: last week, 13 of the 20 U.S. carload categories we track, representing 87% of total carloads, saw year-over-year declines, including big declines in steel scrap, steel products, nonferrous scrap, crushed stone and sand, and petroleum products. Based on rail data, it's clear that many sectors of U.S. industry are beginning to feel the impact of coronavirus disruptions.

"Intermodal volume last week was down 15.7% over last year," Gray said. "With China in the very early stages of its own recovery, whether intermodal volumes will continue to fall - and if they do continue to fall, how far - will now depend to a large extent on what happens with consumer spending in North America. That, in turn, will depend on how long social distancing steps must remain in place; how well and how quickly federal and state unemployment insurance and other programs fill gaps in household cash flows; and how much the current situation causes consumers to lose long-term confidence and remain in retrench mode not just when health concerns begin to recede but, more importantly, when they have been largely resolved."

For the first 14 weeks of 2020, U.S. railroads reported cumulative volume of 3,203,962 carloads, down 7.1 percent from the same point last year; and 3,396,469 intermodal units, down 9.1 percent from last year. Total combined U.S. traffic for the first 14 weeks of 2020 was 6,600,431 carloads and intermodal units, a decrease of 8.1 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]