Week 12 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 marginally 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.

We review this data set to understand the economy. The intuitive sectors (total carloads removing coal, grain, and petroleum) contracted 2.3 % year-over-year for this week [unchanged from 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 improved from -1.7 % to -1.6 %.

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. Last week the counts were in expansion but they returned to contraction this week.

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 459,966 carloads and intermodal units, down 8.6 percent compared with the same week last year.

Total carloads for the week ending March 21 were 224,048 carloads, down 5.4 percent compared with the same week in 2019, while U.S. weekly intermodal volume was 235,918 containers and trailers, down 11.4 percent compared to 2019.

"Demand for rail service depends on the demand further down the chain for the products railroads haul and on the ability of firms they serve to produce what is demanded," said AAR Senior Vice President John T. Gray. "Autos are a good example. What with job uncertainty and either voluntary or enforced social distancing for many people, this isn't a great time to visit new car showrooms, so demand for autos is down. Further, most automakers have suspended manufacturing operations for the time being. As a result of both these factors, rail carloads of autos and auto parts fell considerably this past week."

"It wouldn't be surprising to see rail volumes of other categories soften in the weeks ahead as steps taken to limit the spread of COVID-19 continue to impact producers, both here and abroad, particularly those of consumer goods or intermediate products from which those goods are produced," Gray added. "The good news is that the intermodal volumes of the railroads serving the West Coast ports that receive the bulk of imports from China appear to have plateaued over the last four weeks, indicating that we may have seen the worst of the COVID-19 impacts on the Asia trade."

Three of the 10 carload commodity groups posted an increase compared with the same week in 2019. They were chemicals, up 3,760 carloads, to 34,471; miscellaneous carloads, up 858 carloads, to 9,747; and farm products excl. grain, and food, up 507 carloads, to 15,984. Commodity groups that posted decreases compared with the same week in 2019 included coal, down 9,223 carloads, to 56,093; nonmetallic minerals, down 4,774 carloads, to 30,674; and metallic ores and metals, down 1,427 carloads, to 18,576.

For the first 12 weeks of 2020, U.S. railroads reported cumulative volume of 2,773,207 carloads, down 6.1 percent from the same point last year; and 2,948,362 intermodal units, down 8.1 percent from last year. Total combined U.S. traffic for the first 12 weeks of 2020 was 5,721,569 carloads and intermodal units, a decrease of 7.2 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]