Rail Week Ending Saturday, May 23 - Looking For Signs Of Improvement

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).

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