No news is good news—or at least that’s how it seems when the Association of American Railroads (AAR) reports on U.S. rail traffic. But according to some industry analysts, the U.S. Class I freight rail industry is in a recession.
For the week ended Oct. 19, 2019—i.e., the 42nd straight week of U.S. traffic downturn—total U.S. weekly rail traffic was 507,381 carloads and intermodal units, down 8.6% compared with the same week last year, according to AAR.
Total carloads for this week were 245,002 carloads, down 7.8% compared with the same week in 2018, while U.S. weekly intermodal volume was 262,379 containers and trailers, down 9.3% compared to 2018.
Two of the 10 carload commodity groups posted an increase compared with the same week in 2018. They were chemicals, up 954 carloads, to 31,720; and petroleum and petroleum products, up 757 carloads, to 12,718. Commodity groups that posted decreases compared with the same week in 2018 included commodities such as coal, down 10,991 carloads, to 75,083; metallic ores and metals, down 3,640 carloads, to 19,706; and motor vehicles and parts, down 2,456 carloads, to 14,749.
“It’s time to call it out: U.S. Class I rail freight is in a recession,” says railroad economist and Railway Age Contributing Editor Jim Blaze. “Any traffic volume approaching a 10% year-over-year drop is a clear warning sign. This is particularly bad news if the flagship service is intermodal. The U.S. rail market has seen three quarters of decline year-over-year. That more than satisfies the classical two quarters of decline, or contraction, in GDP terms. A recession occurs when there are two or more consecutive quarters of negative economic growth.
“When an economy is facing recession, business sales and revenues decrease, which cause businesses to stop expanding. Based on my 21 years working mostly on the executive floors at Conrail, I have seen this kind of trending decline data pattern before. It eats away at the confidence level of the so-called ‘inner core’ of rail executive officers.
“The typical response of executives who have watched railroads lose market share for decades is to cut back on peripheral expenses and cut capex budgets for the coming month or year, and to find ways to aggressively cut variable expenses per train start.
“Since the railroad companies do not directly sell retail intermodal services themselves, but reply upon others ‘to carry their water’ so to speak, the natural tendency is to corporately retrench. A few, such as BNSF or CN, might try to buck the recessionary corporate fear. But overall, a negative fear permeates companies that are too often a shipper’s second choice.
“I have witnessed this pattern as a railwayman before.”
For the first 42 weeks of 2019, U.S. railroads reported cumulative volume of 10,600,083 carloads, down 4.1% from the same point last year; and 11,187,351 intermodal units, down 4.3% from last year. Total combined U.S. traffic for the first 42 weeks of 2019 was 21,787,434 carloads and intermodal units, a decrease of 4.2% compared to last year.
North American rail volume for the week ended Oct. 19, 2019, on 12 reporting U.S., Canadian and Mexican railroads totaled 342,960 carloads, down 8.4% compared with the same week last year, and 349,837 intermodal units, down 8.1% compared with last year. Total combined weekly rail traffic in North America was 692,797 carloads and intermodal units, down 8.2%. North American rail volume for the first 42 weeks of 2019 was 29,744,541 carloads and intermodal units, down 3.1% compared with 2018.
Canadian railroads reported 78,199 carloads for the week, down 10.5%, and 68,414 intermodal units, down 4.6% compared with the same week in 2018. For the first 42 weeks of 2019, Canadian railroads reported cumulative rail traffic volume of 6,370,915 carloads, containers and trailers, up 0.9%.
Mexican railroads reported 19,759 carloads for the week, down 7.2% compared with the same week last year, and 19,044 intermodal units, down 2.5%. Cumulative volume on Mexican railroads for the first 42 weeks of 2019 was 1,586,192 carloads and intermodal containers and trailers, down 2.8% from the same point last year.