Week 22 of 2018 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data.

Analyst Opinion of the Rail Data

We review this data set to understand the economy. If coal and grain are removed from the analysis for carloads, this week it expanded 4.6 %. We primarily use rolling averages the analyze the data due to weekly volatility - and the 4 week rolling average for the intuitive sectors declined marginally to 3.6 % from 3.9 %.

The primary reason for the soft numbers this week was coal movements contracted.

Intermodal transport growth remains strong year-over-year.

The following graph compares the four-week moving averages for carload economically intuitive sectors (red line) vs. total movements (blue line):

Although rail's growth rate is improving (and is better than GDP growth - it has yet to confirm that the economy is getting ready for a growth spurt.

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 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 of the data from the AAR:

U.S. railroads originated 1,319,420 carloads in May 2018, up 3.2 percent, or 41,078 carloads, from May 2017. U.S. railroads also originated 1,398,203 containers and trailers in May 2018, up 6.6 percent, or 86,010 units, from the same month last year. Combined U.S. carload and intermodal originations in May 2018 were 2,717,623, up 4.9 percent, or 127,088 carloads and intermodal units from May 2017.

In May 2018, 15 of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with May 2017. These included: crushed stone, sand & gravel, up 16,811 carloads or 13.7 percent; chemicals, up 9,368 carloads or 6.1 percent; and coal, up 6,707 carloads or 1.7 percent. Commodities that saw declines in May 2018 from May 2017 included: nonmetallic minerals, down 4,187 carloads or 17 percent; metallic ores, down 2,254 carloads or 6.6 percent; and all other carloads, down 2,076 carloads or 6.9 percent.

"In May, U.S. rail carloads were higher in 15 of the 20 carload commodity categories the AAR tracks, including nearly all of the major ones," said AAR Senior Vice President of Policy and Economics John T. Gray. "In addition, intermodal volume in May was the second highest for any month in history. Right now, the economy is clicking, and railroads are both beneficiaries and enablers of that. One potential cloud on the horizon, though, involves trade. Freight railroads are essential to the flow of goods and rely on sensible trade policy. We're hopeful that federal policymakers will recognize that an unnecessary trade war would do far more harm than good."

Excluding coal, carloads were up 34,371 carloads, or 3.9 percent, in May 2018 from May 2017. Excluding coal and grain, carloads were up 31,198 carloads, or 4.1 percent.

Total U.S. carload traffic for the first five months of 2018 was 5,666,645 carloads, up 1.2 percent, or 66,071 carloads, from the same period last year; and 5,993,584 intermodal units, up 6 percent, or 336,944 containers and trailers, from last year.

Total combined U.S. traffic for the first 22 weeks of 2018 was 11,660,229 carloads and intermodal units, an increase of 3.6 percent compared to last year.

Week Ending June 2, 2018

Total U.S. weekly rail traffic was 509,740 carloads and intermodal units, up 3.2 percent compared with the same week last year, which also included the Memorial Day holiday.

Total carloads for the week ending June 2 were 252,162 carloads, up 0.2 percent compared with the same week in 2017, while U.S. weekly intermodal volume was 257,578 containers and trailers, up 6.3 percent compared to 2017.

Eight of the 10 carload commodity groups posted an increase compared with the same week in 2017. They included nonmetallic minerals, up 1,690 carloads, to 36,410; petroleum and petroleum products, up 1,629 carloads, to 10,810; and chemicals, up 1,392 carloads, to 31,129. Commodity groups that posted decreases compared with the same week in 2017 were coal, down 6,380 carloads, to 76,242; and grain, down 332 carloads, to 22,537.

Coal is over 1/3 of the total railcar count, and this week the EIA says coal production is 9.5 % lower than the production estimate in the comparable week in 2017.

The middle row in the table below removes coal and grain from the changes in the railcar counts as neither of these commodities is economically intuitive.

[click on graph below to enlarge]

For the week ended June 2, 2018

• Estimated U.S. coal production totaled approximately 13.4 million short tons (mmst)
• This production estimate is 10% lower than last week's estimate and 9.5% lower than the production estimate in the comparable week in 2017
• East of the Mississippi River coal production totaled 5.5 mmst
• West of the Mississippi River coal production totaled 7.9 mmst
• U.S. year-to-date coal production totaled 316.4 mmst, 1.8% lower than the comparable year-to-date coal production in 2017