Always consider hidden risks
Here, we will take a look at US Rail Traffic to give us a clue about the state of the US economy.
Week 8 of 2014 ending February 22 shows same week total rail traffic above 2013 levels according to data released by the Association of American Railroads (AAR).
This week Year-over-Year +1.3%
Year Cumulative to Date
Seven of the 10 carload commodity groups posted increases compared with the same week in 2013, including grain with 23,175 carloads, up 24.4 percent; and, petroleum and petroleum products with 15,211 carloads, up 13.1 percent. Commodities showing a decrease compared with the same week last year included metallic ores and metals with 22,539 carloads, down 1.8 percent.
“2013 ended the way it began — strong intermodal, weak coal, and mixed performance for other commodities, resulting in a year for rail traffic that could have been much better but also could have been much worse,” said AAR Senior Vice President John T. Gray. “A variety of indicators seem to be saying that the economy is slowly strengthening; a trend we expect to continue in 2014.”
But what about the US Rail Traffic and US Economic Growth; Read Below a research made by the Association of American Railroads
US Rail Traffic in Details
The Association of American Railroads (AAR) today reported increased U.S. rail traffic for the week ending Feb. 22, 2014 with 281,678 total U.S. carloads, up 1.3 percent compared with the same week last year. Total U.S. weekly intermodal volume was 253,358 units, up 6.4 percent compared with the same week last year. Total combined U.S. weekly rail traffic was 535,036 carloads and intermodal units, up 3.7 percent compared with the same week last year.
In 2013, 11 of the 20 carload commodity categories tracked annually by AAR saw increases on U.S. railroads compared with 2012. The categories with sizable gains were: petroleum and petroleum products, up 167,868 carloads or 31.1 percent; crushed stone, gravel and sand, up 81,023 carloads or 8.3 percent; motor vehicles and parts, up 41,166 carloads or 5.1 percent, and waste and nonferrous scrap, up 14,472 carloads or 9.1 percent.
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From a research made by the Association of American Railroads ( Rail Time ) in 2011:
Even in a new economy where internet and communications redone the business, we are still demandeing a lot of real physical goods in terms of consumption behavior. Food, cars, computers, cellphones are a few examples...
The more “stuff” people and firms are buying, the higher rail traffic levels are likely to be. And the
more “stuff” people and firms are buying (everything else equal), the stronger economic growth is
likely to be. In theory, this makes rail traffic a useful gauge of broader economic activity.
But how true is this in practice? To help find out, we recently compared U.S. rail traffic by
commodity back to 1989 (which is as far back as our data go) against GDP growth. Econometric
models that attempt to quantify relationships between economic variables can be extremely
complex. However, we intentionally kept the analysis very simple.
Specifically, we calculated the correlation between the percentage change in year-over-year
quarterly rail traffic and the percentage change in year-over-year annualized quarterly U.S. GDP
for four different time periods: Q1 1989 to Q3 2011; Q1 1995 to Q3 2011; Q1 2000 to Q3 2011;
and Q1 2005 to Q3 2011. Correlation can range from -100% (a perfect negative correlation) to
100% (a perfect positive correlation). Perfect correlation (either positive or negative) between two
economic variables never happens, but the closer a correlation is to one of the extremes, the
stronger it is.
The table on the next page summarizes our results. In all four periods we examined, the traffic
category “total carloads plus intermodal” had the strongest correlation with GDP. It’s average
correlation for the four periods was 81%, ahead of “total carloads” (80%) and “intermodal” (76%).
The table on the right summarizes the results of that part of our analysis. For
nearly all commodities, the correlation between rail traffic and GDP growth is weaker when the
comparison is made to GDP one quarter later than to GDP for the current period.
for “total carloads plus intermodal,” the average correlation between rail traffic and GDP for the
same period was 81%, but the average correlation between rail traffic and GDP one period later
for was a much lower 68%.
The strongest average correlation for the four time periods examined between rail traffic in one
period and GDP one quarter later was 77%, for the commodity “motor vehicles and parts.” This
was one of the few commodities for which the average correlation was higher when traffic was
compared to GDP one quarter later (77%) than when it was compared to GDP for the same
quarter (71%). “Motor vehicles and parts” had the highest correlation for each of the four time
periods examined, making it clearly the best single rail commodity to use as a gauge of near-term
In other words, rail traffic totals appear to better reflect how well the overall economy is currently
performing than rail traffic for any individual commodity does.
Among individual commodity
categories, the strongest average correlations over the four periods examined were “lumber and
wood products” (75%), “crushed stone, gravel, and sand” (74%), and “stone, clay, and glass
We also were interested in finding out what rail commodities might be most useful as a gauge of
future near-term economic health. To that end, we ran the numbers again, but this time we
calculated the correlation between the percentage change in year-over-year rail traffic for various
commodities and the year-over-year percentage change in GDP one quarter later.
year-over-year changes in rail traffic from Q1 1989 through Q2 2011 were compared to yearover-
year changes in GDP from Q2 1989 through Q3 2011.
Three main factosr to observe here;
1) Main rail traffic is picking up, so very good in terms of economic activity going forward...
2) “Motor vehicles and parts” had the highest correlation for each of the four time periods examined, making it clearly the best single rail commodity to use as a gauge of near-term economic strength.
3) Weather have been impacting the mix of the car loads Since the beginning of the year...
In 2013, 11 of the 20 carload commodity categories tracked annually by AAR saw increases on U.S. railroads compared with 2012. The categories with sizable gains were: Motor Vehicles and Parts up 41,166 carloads or 5.1 percent.
See the full report here: U.S. Rail Traffic
Are US Rail Traffic Telling Us to Expect a Mixed Economic Activity ? $MACRO, $STUDY, $IYT, $DJT
Are US Rail Traffic Telling Us to Expect a Mixed Economic Activity ?
March 3 ( From The Association of American Railroads )
Rail traffic as a gauge of economic activity