Economic Weakness Seems To Loom
Very telling of economic activity is
the Association of American Rail Roads (AARR) weekly traffic report.
Railroad reports show shipment volume among various goods and
commodities on a weekly basis, and are compared year over year.
Rail shipments actually correspond with
other economic numbers, demonstrating economic connections. In many
previous articles I wrote about support in retail coming from gas
stations, vehicle sales and building material retailers. Economic
evidence of these propositions are supported by rail shipments.
Two things stand out of note in rail activity.
Firstly, declines in rail shipments of grain and farm products.
Secondly, an overall weakening in shipment activity, perhaps corresponding with softening in manufacturing.
AARR last reported on March 22 showing
results for the week of March 17. Data reveals that rail car shipments for the
week declined by 5.3% versus the same week a year ago March 2011.
Intermodal containers, very well suited for export purposes, are
nonetheless up 2%. Intermodal containers can ship wheat, apparels, cars, lumber,
etc. But are noted here especially for their common use in export
activity.
For the 11 weeks ending March 17, AARR
reports that rail car shipments declined 1.8% versus the
same period of 2011. Intermodal, on the other hand and for the same
period, increased by 2.3%. March rail car numbers are trending with
February shipments, which were down .3% for the first 7 weeks of
2012, versus year ago results.
Knowing the story means knowing that
intermodal shipping unit numbers are progressively becoming ever
closer to rail car unit numbers. Progressing numbers of
intermodal units perhaps tells of ultimate export activity, or at
least a search to move a good or commodity among various forms of
transportation, in increasing numbers. Maybe simply a search to
overcome U.S. infrastructure deficits.
Real Weakness Can Show A Change In
Dynamic
March activity among particular
commodity groups tend to reflect activity in retail sales, but show
developing dynamics. Developing numbers are grain shipments for March 2012 versus March 2011
being down a considerable -8.4% year/year for the month, and down -10.3% for the eleven weeks
ending March 17. Farm products excluding grain look more concerning,
with a decline of -21.9% versus March 2011 and a decline of -12.4%
for the 11 week period ending March 17.
Food and Grain Mill products are also
showing noted declines. Surmising causation of these declines is the
expectation of greater than expected agricultural production. Perhaps
due to weather and also sustained inventories. Also added to grain and farming declines might include the discontinuation of the federal subsidy on ethanol.
Existing Strength Remains Strong
Advancing on the rail line are our
typical suspects. Petroleum up 32% for the period and for the 11
weeks, up some 27.6%. Such results show more a consequence of
pipeline and tanker deficits than actual demand. Rail is now moving
where capacity in conventional transport can't currently increase.
How many barrels of oil can one put into an intermodal container?
Aside from Petroleum, we have cars
rising 15. 5% and 19.4%; stone, clay and glass 11.3% and 8.4%; metals
at 8.2% and 11%.
All of these show the strength in not
only the need for oil and gas to find a new way around the country
and into export terminals, but also demand shown in retail. While gas
retail has ultimately increased due to price, and new production searches for delivery avenues; vehicle sales seem to be
organic. Vehicles have supported associated industries such as
metals and glass. A more recent component is building materials and
home improvement. Apparel sales have also demonstrated strength.
Given the guide of indicators, weakness
seems generally present. A few components have lead with
considerable strength. But for how long, and will the other growing sectors develop.
The seriously weak components must be
investigated, being grain, food, coal.
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