United States rail carload and intermodal volumes saw annual gains in July, according to the new edition of the “Rail Industry Overview (RIO),” which was recently published by the Washington, D.C.-based Association of American Railroads (AAR).
This free publication is issued monthly by the AAR and provides insights from AAR’s economists, regarding what rail traffic is saying about the current state of the economy, as well as where things may be headed. It also features a Freight Rail Index (FRI), which AAR said “tracks movement across the most economically sensitive rail traffic commodities,” including U.S. carload commodities (excluding coal and grain) and intermodal containers and trailers.
AAR Chief Economist Rand Ghayad told LM that the RIO essentially provides a summary of the key findings from the roughly 45 reports AAR produces for various industry stakeholders, with some of those reports geared towards those in the freight rail industry, as well as policy makers, and academics, with data and information coming from what he called a wide range of sources.
“Rail volume or rail traffic data in general is usually seen as a very important and solid indicator of what’s happening in the economy,” he said. “So, if you want to know how is the economy is going to be moving over the next couple of months, one way is actually to look at what’s happening in the rail industry. The whole idea of RIO is to summarize the findings from everything we’re putting out there and connect the dots with what’s happening in the economy. If the industry is doing well, it means the economy is on the right track. If the industry is not doing well, it means there are some concerns about how the economy is proceeding. It’s meant to be very easy to digest. It’s not meant to be very technical. It’s not meant to be only for, rail folks. It’s meant to be for everybody who’s interested to know about the economy, and mostly about how rail drives the economy.”
The July FRI saw a 4.0% annual increase, marking its first increase in four months, with AAR saying it brings it back to its highest point over that period.
July U.S. rail carloads, at roughly 1,098,947, posted a 4.6% annual gain, for its fifth consecutive month of annual monthly gains, with 15 of the 20 carload commodity groups tracked by the AAR up annually. And the weekly carload average, at 224,568, represented the highest reading for July going back to 2019. And on a year-to-date basis, carloads are up 2.8%, or roughly 186,000 carloads, annually.
“Rail volumes are holding up, indicating goods movement remains resilient despite the headwinds,” said AAR. “Looking ahead, though, sustained pressure on labor markets and consumer demand could eventually weigh on freight activity.”
July intermodal volume, at roughly 1,351,493 units, increased 2.4% annually, following a 2.9% annual decline in June, which was the first annual decline in 22 months. Weekly July intermodal originations, at 270,175 units, came in at the second highest level on record for July, trailing only 2018.
“Several factors likely contributed to intermodal’s dip in June and recovery in July,” noted AAR. “A drawdown in business inventories during Q2 suggests many firms were selling off stockpiles rather than placing new orders in June, temporarily dampening freight demand. Also, a decline in U.S. goods imports in June weighed on intermodal volumes, which rely heavily on containerized imports from ports. As inventories thinned and port activity normalized, intermodal volumes recovered in July. This suggests that while underlying demand may be fragile, it remains fundamentally intact, at least for now.”
