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7/31/2019 AAR Rail Time Indicators - August 2012
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Rail Time Indicators
A Review of Key Economic Trends
Shaping Demand for Rail Transportation
Policy & Economics Department
Association of American Railroads
Washington, D.C.
August 3, 2012
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Rail Time Indicators is issued monthly by the Policy and Economics Department of the
Association of American Railroads. It is free of charge.
To get on the e-mail distribution list for Rail Time Indicators , send a request including your nameand business affiliation, if any, to Beth Eagney at [email protected].
If you have questions or comments about the content of Rail Time Indicators ,please contact Dan Keen ([email protected], 202-639-2326)
or Shannon Stare ([email protected], 202-639-2322).
Copyright 2012 by the Association of American Railroads. Reproduction or retransmittal ofRail Time Indicators within a company for internal use is allowed, as is reasonable redistributionoutside a company (for example, passing it on to someone you think might be interested in it).
Unless approved by the AAR, reproduction or retransmittal for commercial use is prohibitedexcept for short excerpts or quotations. Uploading of Rail Time Indicators to a public web site is
prohibited unless approved by the AAR.
All media inquiries should be directed to Holly Arthur ([email protected], 202-639-2344).
The last six editions of Rail Time Indicators are available on the AAR web site here.
Rail traffic data in Rail Time Indicators are sometimes presented on a seasonally adjusted basisand sometimes on a non-seasonally adjusted basis. Because of the nature of the AAR’s weeklyrail traffic data and the nature of rail traffic (e.g., daily data are not available; some months havefour weeks of data and some have five; holidays may be in one rail traffic month one year and ina different month the next; rail traffic varies by the day of the week; some commodity categories
can exhibit wide swings in carloads from month to month for reasons unrelated to seasonalvariations; the weather can have significant effects on traffic), the seasonal-adjustment processfor rail traffic is not completely precise. Seasonally adjusted rail traffic data should be
considered a complement to, rather than a replacement for, unadjusted rail traffic data.
Information in Rail Time Indicators is obtained from sources believed to be reliable. However,the Association of American Railroads makes no representations as to the accuracy or
completeness of such information and assumes no liability for errors or omissions.
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`Rail Time Indicators – August 3, 2012 Page 1 of 39
SUMMARY OF MOST RECENT DATA
Economic Indicator Most Recent Data
U.S. Freight Rail Traffic (p. 2) Not Seasonally Adjusted: Total carloads 0.7%, carloads excludingcoal flat, carloads excluding coal and grain 1.4%, and intermodal 5.6% in July 2012 compared with July 2011. Highest weekly intermodal
average of any July in history.
Seasonally Adjusted: Carloads in July 2012 flat compared with June2012; intermodal in July 2012 2.5% from June 2012.
Canadian Freight Rail Traffic(p. 4)
Not Seasonally Adjusted: Carloads in July 2012 1.7% over July 2011;intermodal in July 2012 5.8% over July 2011.
Seasonally Adjusted: Carloads in July 2012 0.3% from June 2012;intermodal in July 2012 4.0% over June 2012.
Gross Domestic Product(p. 18)
1.5% in Q2 2012, according to the BEA’s first preliminary estimatereleased on July 27. Down from 2.0% in Q1 2012 and 4.1% in Q4 2011.
Purchasing Managers Index(p. 21)
to 49.8 in July 2012 from 49.7 in June 2012. New orders to 48.0 inJuly 2012 from 47.8 in June 2012.
Non-Manufact. Index (p. 21) to 52.6 in July 2012 from 52.1 in June 2012.
Manufacturing Inventoriesand Sales (p. 22)
Manufacturing sales 1.1%, manufacturing inventories 0.1%, andinventory-sales ratio 1.2% in June 2012 compared with May 2012.
Industrial Production (p. 24) Overall industrial output 0.4% in June 2012 over May 2012.Manufacturing output 0.7% in June 2012 from May 2012.
Capacity Utilization (p. 26) to 78.9% in June 2012 from a revised 78.7% in May 2012.Manufacturing to 77.7% in June 2012 from 77.3% in May 2012.
Employment andUnemployment Rate (p. 28)
163,000 net new jobs created in July 2012, up from a revised 64,000 inJune. Unemployment rate up to 8.3% in July 2012.
Railroad Employment (p. 30) 611 to 163,159 employees in June 2012 from a revised 162,548 inMay 2012. Highest employment level since October 2008.
Consumer Confidence (p. 31) Conference Board index to 65.9 in July 2012 from 62.7 in June 2012.First increase after four straight declines. Thomson Reuters/Universityof Michigan index to 72.3 in July from 73.2 in June.
Retail Sales (p. 32) 0.5% ($1.9 billion) in June 2012 from May 2012; third straight decline.
Light Vehicle Sales (p. 34) to 14.0 million (annualized) in July 2012 from 14.3 million in June.
Housing Starts (p. 35) to 760,000 annualized in June 2012 from 711,000 in May 2012;highest since October 2008.
Consumer Price Index (p. 37) Unchanged in June 2012 from May 2012; 1.7% for the year endingJune 2012.
Rail Freight Cars in Storage(p. 39)
to 314,971 on August 1, 2012 (20.6% of the fleet), down 2,710 carsfrom July 1, 2012. First decline after nine straight monthly increases.
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`Rail Time Indicators – August 3, 2012 Page 2 of 39
U.S. AND CANADIAN FREIGHT RAILROAD TRAFFIC
What is it and why is it important?
The Association of American Railroads (AAR) releases its Weekly Railroad Traffic report everyThursday morning. The report contains rail traffic data for the previous week. Weekly data areaggregated into monthly totals in Rail Time Indicators . Railroads reporting to the AAR togetherhandle about 95% of total U.S. and Canadian freight rail traffic.
AAR rail traffic data are reported as carloads or as intermodal units. Carload traffic is classifiedinto one of 20 different commodity categories and is carried in a variety of rail car types ( e.g ., tankcars, covered hoppers, gondolas, boxcars, etc.). A unit of rail intermodal traffic is either ashipping container (currently about 87% of U.S. rail intermodal traffic) or a truck trailer (about13%) carried on a railroad flat car. Intermodal is not included in carload figures. Commoditydetail on the freight inside the container or trailer is not available.
Freight railroading is a “derived demand” industry: demand for rail service occurs as a result ofdemand elsewhere in the economy for the products railroads haul. Thus, rail traffic is a usefulgauge of broader economic activity, especially of the “tangible” economy.
What are the latest numbers for U.S. railroads?
U.S. railroads originated 1,103,733 total carloads in July 2012, down 0.7% (7,787 carloads)from July 2011. It was the sixth straight year-over-year monthly decline, but at 0.7% it was thelowest percentage decline in those six months (see chart below right).
U.S. intermodal traffic was up 5.6% (50,431 containers and trailers) in July 2012 over July2011 to 946,071 units, its 32
ndconsecutive year-over-year monthly increase. Average weekly
intermodal volume in July 2012 was 236,518 units, the highest of any July in history (see thecharts on the top of the next page).
Coal accounts for far more rail carloads than any other commodity. In July 2012, coal carloads
were down 1.7% (7,945 carloads) from July 2011 (see the charts on the top of page 9). Coalaccounted for 42.4% of U.S. carload traffic in July 2012, its highest share since January 2012.
Chemicals and grain have the second and third highest carload volumes for U.S. railroads. U.S.chemical carloads totaled 115,028 in July 2012, down 3.1% (3,674 carloads) from July 2011 —their fifth year-over-year monthly decline in 2012’s seven months (see the charts on the top ofpage 10). U.S. carloads of grain were down 10.0% (7,860 carloads) in July 2012, their 13th consecutive year-over-year monthly decline (see the charts on the top of page 11).
240,000
260,000
280,000
300,000
320,000
340,000
360,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloads: All Commodities(not seasonally adjusted)
2006 (peak year)
2009
2012
Data are weekly average originations for each month, exclude the U.S. operations of CN andCP, and reflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
% Change in Total U.S. Rail Carloads From SameMonth Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 0.7% from July 2011 and down 1.7% from July 2010.
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`Rail Time Indicators – August 3, 2012 Page 3 of 39
U.S. rail carloads excluding coal totaled 638,288 in July 2012, virtually unchanged (up 158carloads) from July 2011. Excluding coal and grain, U.S. rail carloads were up 1.4% (8,018carloads) in July 2012 over July 2011 (see the charts on the middle and bottom of page 12).
Commodities with gains on U.S. railroads in July 2012 included petroleum and petroleumproducts (up 13,368 carloads, or 47.2% — see the charts in the middle of page 14, whichinclude movements by Canadian railroads); motor vehicle and parts (up 9,317 carloads, or23.3% — bottom of page 14); and food products (up 2,297 carloads, or 9.9%).
In addition to coal, grain, and chemicals, commodities with carload declines in July 2012 on U.S.railroads included metallic ores (down 6,182 carloads, or 16.2% — see the charts on the bottomof page 15) and iron and steel scrap (down 5,029 carloads, or 26.9%).
U.S. carloads of “industrial products” — an aggregation (admittedly somewhat arbitrary) ofchemicals; paper; primary metal products; autos and auto parts; stone, clay and glass products;metallic ores; and crushed stone, gravel, and sand — were down 0.2% (884 carloads) in July2012. It’s the first time that carloads of this group of commodities were down since November2009 (see the charts on the top of page 13). The big drop incarloads of metallic ores was largely to blame.
The table on page 6 has more commodity detail for U.S.railroads. Eight of the 20 commodity categories tracked bythe AAR saw carload gains in July 2012 year over year, thelowest such number since May 2011 (see table at right). Bycontrast, 13 of the 20 categories are up year-to-date in 2012compared with 2011.
That can only happen, of course, if several commodities thatare up year to date were down in July. The chart on the top ofthe next page shows the percentage change in U.S. railcarloads by commodity in 2012 versus 2011 for 1) July onlyand 2) January through June in aggregate. For severalcommodities, carloads fell in July but were up in Januarythrough June. For example, carloads of iron and steel scrap(generally used to produce new steel) were up 1.8% in Januarythrough June, but were down 26.9% in July. Likewise,carloads of waste and nonferrous scrap (consisting largely ofwaste paper and cardboard and municipal debris) were up 5.7% in January through June, butwere down 6.0% in July.
Several other commodities saw carload growth in July, but at rates lower than they grew inJanuary through June. For example, carloads of crushed stone, sand, and gravel were up 8.6%in January to June, but up only 0.5% in July.
Month 2010 2011 2012
Jan 11 15 11Feb 13 15 14Mar 16 15 12Apr 19 9 11May 19 8 13Jun 17 14 9Jul 13 12 8Aug 16 12Sep 14 13Oct 15 12
Nov 13 13Dec 16 16
*Out of 20. Source: AAR
# of AAR Commodity Categories*With Year-Over-Year Gains
For U.S. Railroads
170,000
180,000
190,000
200,000210,000
220,000
230,000
240,000
250,000
260,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Intermodal Traffic(not seasonally adjusted)
2006 (peak year)
2009
2012
Data are weekly average originations for each month, exclude U.S. operations of CN and CP, andreflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011
-25%
-20%
-15%
-10%
-5%0%
5%
10%
15%
20%
25%
% Change in U.S. Rail Intermodal Traffic From SameMonth Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, e xclude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 5.6% over July 2011 and up 7.0% over July 2010.
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`Rail Time Indicators – August 3, 2012 Page 4 of 39
To be sure, some commoditycategories bucked these trends — forexample, carloads of motor vehiclesand equipment were up 23.3% in July,compared to an 18.6% gain inJanuary through June.
Coal and grain carloads have beendown throughout 2012 for reasonsthat have little to do with the conditionof the economy. But for carloads ofother more economically sensitivecommodities, we get a mixedmessage in July. While somecommodities (e.g., lumber and woodproducts, autos and auto parts) stillsaw strong growth in July, otherseither grew more slowly or actually fell. It remains to be seen if July was just a blip on the road tomore rapid growth or a sign that something more serious might be going on.
U.S. carload volume in 2012 through July was 2.6% (223,342 carloads) lower than it was in
2011 through July, 16.2% lower than it was in 2006 through July (the peak year to date), and6.9% higher than it was in 2009 through July. Carload volume bottomed out in 2009 due to therecession — see the chart below left.
U.S. intermodal volume in 2012 through July was 3.6% (243,972 containers and trailers)higher than it was in 2011 through July, 0.4% higher than it was in 2006 (the peak year to date),and 25.7% higher than it was in 2009. Intermodal volume too bottomed out in 2009 due to therecession. See the chart below right — the 2006 and 2012 lines overlap almost completely.
Seasonally adjusted total U.S. rail carloads were unchanged in July 2012 compared with
June 2012. Seasonally adjusted U.S. rail intermodal traffic was down 2.5% in July 2012from June 2012, mainly because seasonally adjusted intermodal volume in June 2012 wasexceptionally high (see the charts on page 16).
What are the latest numbers for Canadian railroads?
Canadian railroads (including their substantial U.S. operations) originated 304,178 carloads inJuly 2012, an average of 76,045 carloads per week and up 1.7% (5,135 carloads) over July2011.
-30% -20% -10% 0% 10% 20% 30% 40% 50%
Waste & nonferrous scrap
Stone, clay & glass prod.
Nonmetallic minerals
Crushed stone, gravel, sand
Motor vehicles & parts
Iron & steel scrap
Primary metal products
Coke
Metallic ores
Pulp & paper products
Lumber & wood products
Coal
Petrol. & petr. products
Chemicals
Food products
Grain mill products
Grain
Jan-June 2012 vs.
Jan-June 2011
July 2012 vs. July2011
% Change in U.S. Rail Carloads
0
1
2
3
4
5
6
7
8
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30Week
Year-to-Date U.S. Rail Intermodal Traffic Through July(millions)
2006
2009
2011
2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
U.S. intermodal volume in 2012 through July was 3.6% higher than it was in 2011 through July, 0.4% higher
than it was in 2006 (the peak year to date) and 25.7% higher than it was in 2009 (when intermodal volume bottomed out due to the recession).
0
1
2
3
4
5
6
78
9
10
11
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30Week
Year-to-Date U.S. Rail Carload Traffic Through July(millions)
2006
2009
2011
2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflect revis ions to original reporting. Source: AAR Weekly Railroad Traffic
U.S. carloadvolume in 2012 through July was 2.6% lower than it was in 2011 through July, 16.2% lower than it was in 2006 (the peak year to date) and 6.9% higher than it was in 2009 (when intermodal volume bottomed out due to the recession).
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`Rail Time Indicators – August 3, 2012 Page 5 of 39
Canadian intermodal volume in July 2012 was up 5.8% (11,624 units) over July 2011 to 211,764 containers and trailers, an average of 52,941 per week and the second highest weeklyaverage (behind June 2012) for any month in history forCanadian railroads.
Year-to-date Canadian carloads were up 3.2% (71,038carloads) in 2012 through July compared with 2011 throughJuly; year-to-date Canadian intermodal volume was up 7.2%(101,721 containers and trailers).
12 of the 20 carload commodity categories tracked by theAAR saw increases on Canadian railroads in July 2012compared with July 2011. Leading the way was petroleumand petroleum products (up 6,623 carloads, or 37.3%),coal (up 5,070 carloads, or 15.5%), and motor vehicles andparts (up 3,466 carloads, or 25.0%).
Commodities showing carload declines on Canadianrailroads in July 2012 included farm products excludinggrain (down 3,607 carloads, or 32.3 percent), metallic ores(up 3,439 carloads, or 6.2%), grain (down 2,500 carloads, or6.9%), and chemicals (down 1,834 carloads, or 4.4%). Seethe table on page 7 for more commodity detail.
Seasonally adjusted Canadian rail carloads in July 2012 were down 0.3% from June 2012,while seasonally adjusted intermodal volume in July 2012 was down 4.0% from June 2012(see the charts on the bottom of page 16).
50,000
55,000
60,000
65,000
70,000
75,000
80,000
85,000
90,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg. Weekly Canadian Rail Carloads: All Commodities(not seasonally adjusted)
2006 (peak year)
2009
2012
Data are weekly average originations for each month, include CN and CP (including their U.S.operations) , and reflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011
-35%-30%-25%-20%-15%-10%-5%0%5%
10%15%20%25%30%35%40%
% Change in Total Canadian Rail Carloads FromSame Month Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including theirU.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 1.7% over July 2011 and up 5.5% over July 2010.
34,000
38,000
42,000
46,000
50,000
54,000
58,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly Canadian Rail Intermodal Traffic(not seasonally adjusted)
2008
2009
2012
Data are based on originations, include CN and CP (including their U.S. operations), andreflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011 (peak year)
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%20%
25%
30%
% Change in Total Canadian Intermodal Traffic FromSame Month Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.operations) , and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 5.8% over July 2011 and up 7.5% over July 2010.
Month 2010 2011 2012Jan 14 9 15Feb 13 13 18Mar 17 9 14Apr 17 10 11May 16 9 9Jun 14 13 10Jul 16 13 12Aug 16 14Sep 15 13Oct 16 16Nov 15 18Dec 19 15
*Out of 20. Source: AAR
# of AAR Commodity Categories*
With Year-Over-Year Gains
For Canadian Railroads
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`Rail Time Indicators – August 3, 2012 Page 6 of 39
400,000
425,000
450,000
475,000
500,000
525,000
550,000
575,000
600,000
625,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Traffic:Total Carloads + Intermodal Units
2006 (peak year)
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2010
2011
-25%
-20%
-15%
-10%
-5%
0%5%
10%
15%
20%
% Change in U.S. Rail Carloads + Intermodal UnitsFrom Same Month Prev. Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 2.1% over July 2011 and up 2.2% over July 2010.
Commodity July 2012 July 2011 July 2010 '12-'11 '12-'10 '12-'11 '12-'10
Agricultural & food products 136,734 141,400 147,413 -4,666 -10,679 -3.3% -7.2%
Grain 70,743 78,603 83,329 -7,860 -12,586 -10.0% -15.1%
Farm products excl. grain 2,787 3,029 3,122 -242 -335 -8.0% -10.7%
Grain mill products (1) 37,735 36,596 37,716 1,139 19 3.1% 0.1%
Food products 25,469 23,172 23,246 2,297 2,223 9.9% 9.6%
Chemicals and petroleum 156,705 147,011 139,984 9,694 16,721 6.6% 11.9%
Chemicals 115,028 118,702 113,178 -3,674 1,850 -3.1% 1.6%
Petroleum & petr. products (2) 41,677 28,309 26,806 13,368 14,871 47.2% 55.5%
Coal 465,445 473,390 510,735 -7,945 -45,290 -1.7% -8.9%
Forest products 42,216 41,690 40,225 526 1,991 1.3% 4.9%
Primary forest products (3) 5,749 6,051 6,437 -302 -688 -5.0% -10.7%
Lumber & wood products 12,148 11,147 9,926 1,001 2,222 9.0% 22.4%
Pulp & paper products 24,319 24,492 23,862 -173 457 -0.7% 1.9%
Metallic ores and metals 98,542 110,254 94,685 -11,712 3,857 -10.6% 4.1%
Metallic ores (4) 31,992 38,174 31,185 -6,182 807 -16.2% 2.6%
Coke 14,211 14,036 13,431 175 780 1.2% 5.8%
Primary metal products (5) 38,667 39,343 36,005 -676 2,662 -1.7% 7.4%
Iron & steel scrap 13,672 18,701 14,064 -5,029 -392 -26.9% -2.8%
Motor vehicles & parts 49,387 40,070 37,443 9,317 11,944 23.3% 31.9%Nonmetallic minerals & prod. 125,533 126,303 121,430 -770 4,103 -0.6% 3.4%
Crushed stone, gravel, sand 74,010 73,673 70,681 337 3,329 0.5% 4.7%
Nonmetallic minerals (6) 20,487 21,761 22,245 -1,274 -1,758 -5.9% -7.9%
Stone, clay & glass prod. (7) 31,036 30,869 28,504 167 2,532 0.5% 8.9%
Other 29,171 31,402 30,804 -2,231 -1,633 -7.1% -5.3%
Waste & nonferrous scrap (8) 12,089 12,858 15,200 -769 -3,111 -6.0% -20.5%
All other carloads 17,082 18,544 15,604 -1,462 1,478 -7.9% 9.5%
TOTAL ALL CARLOADS 1,103,733 1,111,520 1,122,719 -7,787 -18,986 -0.7% -1.7%
Trailers 113,100 123,389 127,638 -10,289 -14,538 -8.3% -11.4%
Containers 832,971 772,251 756,287 60,720 76,684 7.9% 10.1%
TOTAL ALL INTERMODAL 946,071 895,640 883,925 50,431 62,146 5.6% 7.0%
*Data are originations not seasonally adjusted. Includes BNSF, CSX, KCS, NS, UP, Birmingham Southern, Florida East Coast, Lake Superior &
Ishpeming, and Paducah & Louisville. Excludes CN's and CP's U.S. operations. Source: AAR Weekly Railroad Traffic
Difference % Change
U.S. RAIL TRAFFIC: JULY 2012*(4 weeks ending July 28, 2012)
(1) - flour, animal f eed, corn syrup, corn starch, soybean meal, DDGs, etc . (5) - primarily iron & steel; some aluminum, copper, etc.
(2) - crude petroleum and all products of petroleum refining (6) - phosphate rock, rock salt, crude sulphur, clay, etc.
(liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.) (7) - cement, ground earths or minerals, gypsum, etc.(3) - w ood raw materials such as pulpwood and wood chips (8) - scrap paper, construction debris, ashes, etc.(4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.
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`Rail Time Indicators – August 3, 2012 Page 7 of 39
Commodity July 2012 July 2011 July 2010 '12-'11 '12-'10 '12-'11 '12-'10
Agricultural & food products 56,496 61,881 62,750 -5,385 -6,254 -8.7% -10.0%
Grain 33,667 36,167 37,070 -2,500 -3,403 -6.9% -9.2%
Farm products excl. grain 7,562 11,169 11,139 -3,607 -3,577 -32.3% -32.1%
Grain mill products (1) 6,756 6,293 5,852 463 904 7.4% 15.4%Food products 8,511 8,252 8,689 259 -178 3.1% -2.0%
Chemicals and petroleum 64,344 59,555 53,924 4,789 10,420 8.0% 19.3%
Chemicals 39,982 41,816 36,194 -1,834 3,788 -4.4% 10.5%
Petroleum & petr. products (2) 24,362 17,739 17,730 6,623 6,632 37.3% 37.4%
Coal 37,713 32,643 34,149 5,070 3,564 15.5% 10.4%
Forest products 30,038 30,637 29,424 -599 614 -2.0% 2.1%
Primary forest products (3) 5,884 5,817 5,751 67 133 1.2% 2.3%
Lumber & wood products 11,076 10,594 9,289 482 1,787 4.5% 19.2%
Pulp & paper products 13,078 14,226 14,384 -1,148 -1,306 -8.1% -9.1%
Metallic ores and metals 67,650 70,982 64,907 -3,332 2,743 -4.7% 4.2%
Metallic ores (4) 52,169 55,608 50,214 -3,439 1,955 -6.2% 3.9%
Coke 3,079 2,748 2,440 331 639 12.0% 26.2%
Primary metal products (5) 8,834 9,109 9,263 -275 -429 -3.0% -4.6%
Iron & steel scrap 3,568 3,517 2,990 51 578 1.5% 19.3%Motor vehicles & parts 17,341 13,875 15,804 3,466 1,537 25.0% 9.7%
Nonmetallic minerals & prod. 22,894 23,136 22,235 -242 659 -1.0% 3.0%
Crushed stone, gravel, sand 11,505 10,211 10,684 1,294 821 12.7% 7.7%
Nonmetallic minerals (6) 5,385 7,050 6,144 -1,665 -759 -23.6% -12.4%
Stone, clay & glass prod. (7) 6,004 5,875 5,407 129 597 2.2% 11.0%
Other 7,702 6,334 5,149 1,368 2,553 21.6% 49.6%
Waste & nonferrous scrap (8) 3,179 1,669 1,561 1,510 1,618 90.5% 103.7%
All other carloads 4,523 4,665 3,588 -142 935 -3.0% 26.1%
TOTAL ALL CARLOADS 304,178 299,043 288,342 5,135 15,836 1.7% 5.5%
Trailers 5,324 6,118 6,120 -794 -796 -13.0% -13.0%
Containers 206,440 194,022 190,798 12,418 15,642 6.4% 8.2%
TOTAL ALL INTERMODAL 211,764 200,140 196,918 11,624 14,846 5.8% 7.5%
CANADIAN RAIL TRAFFIC: JULY 2012*(4 weeks ending July 28, 2012)
Difference % Change
*CN and CP, including their U.S. operations. Data are originations not seasonally adjusted. Source: AAR Week ly Railroad Traffic
(1) - flour, animal feed, corn syrup, corn starch, soybean meal, DDGs, etc. (5) - primarily iron & steel; some aluminum, copper, etc.
(2) - crude petroleum and all products of petroleum refining (6) - phosphate rock, rock salt, crude sulphur, clay, etc.
(liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.) (7) - cement, ground earths or minerals, gypsum, etc.(3) - wood raw materials such as pulpwood and wood chips (8) - scrap paper, construction debris, ashes, etc.(4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.
90,000
100,000
110,000
120,000
130,000
140,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly Canadian Rail Traffic:Total Carloads + Intermodal Units
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, include CN andCP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR
2007 (peak year)
20102011
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
% Change in Canadian Carloads + Intermodal UnitsFrom Same Month Prev. Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.operations) , and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 3.4% over July 2011 and up 6.3% over July 2010.
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Commodity July 2012 July 2011 July 2010 '12-'11 '12-'10 '12-'11 '12-'10
Agricultural & food products 193,230 203,281 210,163 -10,051 -16,933 -4.9% -8.1%
Grain 104,410 114,770 120,399 -10,360 -15,989 -9.0% -13.3%
Farm products excl. grain 10,349 14,198 14,261 -3,849 -3,912 -27.1% -27.4%
Grain mill products (1) 44,491 42,889 43,568 1,602 923 3.7% 2.1%
Food products 33,980 31,424 31,935 2,556 2,045 8.1% 6.4%
Chemicals and petroleum 221,049 206,566 193,908 14,483 27,141 7.0% 14.0%
Chemicals 155,010 160,518 149,372 -5,508 5,638 -3.4% 3.8%
Petroleum & petr. products (2) 66,039 46,048 44,536 19,991 21,503 43.4% 48.3%
Coal 503,158 506,033 544,884 -2,875 -41,726 -0.6% -7.7%
Forest products 72,254 72,327 69,649 -73 2,605 -0.1% 3.7%
Primary forest products (3) 11,633 11,868 12,188 -235 -555 -2.0% -4.6%
Lumber & wood products 23,224 21,741 19,215 1,483 4,009 6.8% 20.9%
Pulp & paper products 37,397 38,718 38,246 -1,321 -849 -3.4% -2.2%
Metallic ores and metals 166,192 181,236 159,592 -15,044 6,600 -8.3% 4.1%
Metallic ores (4) 84,161 93,782 81,399 -9,621 2,762 -10.3% 3.4%
Coke 17,290 16,784 15,871 506 1,419 3.0% 8.9%
Primary metal products (5) 47,501 48,452 45,268 -951 2,233 -2.0% 4.9%
Iron & steel scrap 17,240 22,218 17,054 -4,978 186 -22.4% 1.1%
Motor vehicles & parts 66,728 53,945 53,247 12,783 13,481 23.7% 25.3%
Nonmetallic minerals & prod. 148,427 149,439 143,665 -1,012 4,762 -0.7% 3.3%
Crushed stone, gravel, sand 85,515 83,884 81,365 1,631 4,150 1.9% 5.1%
Nonmetallic minerals (6) 25,872 28,811 28,389 -2,939 -2,517 -10.2% -8.9%
Stone, clay & glass prod. (7) 37,040 36,744 33,911 296 3,129 0.8% 9.2%
Other 36,873 37,736 35,953 -863 920 -2.3% 2.6%
Waste & nonferrous scrap (8) 15,268 14,527 16,761 741 -1,493 5.1% -8.9%
All other carloads 21,605 23,209 19,192 -1,604 2,413 -6.9% 12.6%
TOTAL ALL CARLOADS 1,407,911 1,410,563 1,411,061 -2,652 -3,150 -0.2% -0.2%
Trailers 118,424 129,507 133,758 -11,083 -15,334 -8.6% -11.5%
Containers 1,039,411 966,273 947,085 73,138 92,326 7.6% 9.7%
TOTAL ALL INTERMODAL 1,157,835 1,095,780 1,080,843 62,055 76,992 5.7% 7.1%
COMBINED U.S. AND CANADIAN RAIL TRAFFIC: JULY 2012*(4 weeks ending July 28, 2012)
Difference % Change
*Data are originations and are not seasonally adjusted. Source: AAR Weekly Railroad Traffic
(1) - flour, animal feed, corn syrup, corn starch, soybean meal, DDGs, etc. (5) - primarily iron & steel; some aluminum, copper, etc.
(2) - crude petroleum and all products of petroleum refining (6) - phosphate rock, rock salt, crude sulphur, c lay, etc.
(liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.) (7) - cement, ground earths or minerals, gypsum, etc.(3) - wood raw materials such as pulpwood and wood chips (8) - scrap paper, construction debris, ashes, etc.(4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.
500,000
525,000
550,000
575,000
600,000
625,000
650,000
675,000
700,000
725,000
750,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. + Canadian Rail Traffic:Total Carloads + Intermodal Units
2006 (peak year)
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, andreflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
% Change in Combined U.S. + Canadian Rail Carloads+ Intermodal Units From Same Month Previous Year:
Jan. 2006 - July 2012
2006 2007 2008 2009 2010 2011Data are based on weekly average originations for each month, are not seasonally adjusted, andreflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2012
July 2012 was up 2.4% over July 2011 and up 3.0% over July 2010.
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`Rail Time Indicators – August 3, 2012 Page 9 of 39
COAL
U.S. coal carloads averaged 116,361 per week in July 2012, the highest weekly average in fivemonths. No doubt this was partly due to record-high temperatures in much of the nation in July that led tohigher electricity generation to power everyone’s air conditioners. The chart on the bottom left showsthat, in May (the most recent data available at the time of this writing), coal was slightly ahead of naturalgas in terms of electricity generation. The chart on the bottom right shows that cooling degree days inJuly were far, far above normal in many states that rely relatively heavily on coal-fired electricity.
12%
16%
20%
24%
28%
32%
36%
40%
44%
48%
52%
Coal vs. Natural Gas as % of U.S. Electricity GenerationJan. 2007 - May 2012
Source: EIA
2007 2008 2009 2010 2011 2012
Coal
Natural gas
100,000
110,000
120,000
130,000
140,000
150,000
160,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloads of Coal
2009
2008 (peak year)
Data are weekly average originations f or each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2012
2010
2011
-20%
-15%
-10%
-5%
0%
5%
10%
15%
% Change in U.S. Rail Carloads of Coal From SameMonth Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 1.7% from July 2011 and down 8.9% from July 2010.
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg. Weekly Canadian Rail Carloads of Coal
2009 2008
Data are weekly average originations for each month, are not seasonally adjusted, include CN andCP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR
2012
2010
2011
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
% Change in Canadian Carloads of Coal From SameMonth Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including theirU.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 15.5% over July 2011 and up 10.4% over July 2010.
CO
ILIN
IA
KY
MIMN
MO
MT
ND
OH
PA
UT
WV
WI
WY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
Source: National Weather Service
% Change in Cooling Degree Days in July 2012Compared With Normal*
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`Rail Time Indicators – August 3, 2012 Page 10 of 39
U.S. railroads originated 115,028 carloads of chemicals in July 2012, down 3.1% (3,674 carloads)from July 2011. For the year through July, U.S. chemical carloads are down 1.5% (13,245 carloads).Carloads of chemicals on Canadian railroads have fallen too, including a 4.4% decline (1,834 carloads) inJuly 2012. The charts on the bottom show U.S. chemical carloads compared with U.S. chemical outputand U.S. chemical capacity utilization. In both cases, the correlation is positive, but only moderately so,as rail carloads have outpaced output and capacity utilization.
CHEMICALS
24,000
25,000
26,000
27,000
28,000
29,000
30,000
31,000
32,000
33,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg. Weekly U.S. Rail Carloads of Chemicals
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2007 (peak year)
2010
2011
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
% Change in U.S. Rail Carloads of Chemicals FromSame Month Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg. Weekly Canadian Rail Carloads of Chemicals
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, inc lude CN andCP (including their U.S. operations) , and reflect revisions to original reporting. Source: AAR
2010
2011
2012
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
% Change in Canadian Carloads of Chemicals FromSame Month Previous Year: Jan. 2009 - July 2012
2009 2010
Data are based on originations, are not seasonally adjusted, include CN and CP (including theirU.S. operations) , and reflect revisions to original reporting. Data prior to 2009 are notcomparable. Source: AAR Weekly Railroad Traffic
2011 2012
July 2012 was down 4.4% from July 2011 and up 10.5% over July 2010.
19,000
21,000
23,000
25,000
27,000
29,000
31,000
33,000
75
80
85
90
95
100
105
110
U.S. Chemical Productionvs. U.S. Rail Carloads of Chemicals
2007 2010 2012201120092008
Data are seasonally adjusted. Carloads are weekly averages. Source: Federal Reserve, AAR
Chemcialproduction(left scale,
Jan. 2007=100)correlation = 62%
Carloads (right scale)
18,000
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
58%
61%
64%
67%
70%
73%
76%
79%
82%
*Capacity utilization is through June 2012 and is adjusted to take into account changes inthe chemical industry's "capacity base" since January 2007. Data are seasonally adjusted.Carloads are weekly averages per month. Source: Federal Reserve, AAR
Capacity Utilization vs. Rail Carloads: ChemicalsJan. 2007 - June 2012*
correlation = 62%
2007 2008 2009 2010 2011 2012
Capacityutilization forchemicals*(left scale)
Carloads (right scale)
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`Rail Time Indicators – August 3, 2012 Page 11 of 39
GRAIN
Grain’s woes continue. U.S. railroads originated 70,743 carloads of grain in July 2012, down10.0% (7,860 carloads) from July 2011 and the 13
thstraight year-over-year monthly decline. It hasn’t
been much better for Canadian railroads: Canadian grain carloads, which include their substantial U.S.grain operations, were down 6.9% (2,500 carloads) in July. The severe drought that decimated graincrops in many areas of the United States over the past month won’t help spur future grain carloadings.
16,000
18,000
20,000
22,000
24,000
26,000
28,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloads of Grain
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2012
2010
2011
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
% Change in U.S. Rail Carloads of Grain From SameMonth Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exc lude U.S. operations of CN andCP, and reflec t revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 10.0% from July 2011and down 15.1% from July 2010.
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
10,500
11,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly Canadian Rail Carloads of Grain
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, inc lude CN andCP (including their U.S. operations) , and reflect revisions to original reporting. Source: AAR
2012
2010
2011
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
% Change in Canadian Carloads of Grain From SameMonth Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including theirU.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 6.9% from July 2011 and down 9.2% from July 2010.
24,000
26,000
28,000
30,000
32,000
34,000
36,000
38,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Combined U.S. + CanadianAverage Weekly Rail Carloads of Grain
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, and reflectrevisions to original reporting. Source: AAR Weekly Railroad Traffic
2008
2010
2011
-30%
-25%
-20%
-15%
-10%
-5%
0%5%
10%
15%
20%
25%
% Change in U.S. + Canadian Rail Carloads of GrainFrom Same Month Prev. Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, inc lude CN and CP (including theirU.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 9.0% from July 2011 and down 13.3% from July 2010.
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`Rail Time Indicators – August 3, 2012 Page 12 of 39
CARLOAD AND INTERMODAL TOTALS
ALL COMMODITIES EXCLUDING COAL
ALL COMMODITIES EXCLUDING COAL AND GRAIN
100,000
125,000
150,000
175,000
200,000
225,000
250,000
275,000
U.S. Rail Intermodal Traffic: Jan. 2006 - July 2012
Data are weekly average originations for each month, are not seasonally adjusted, and excludeU.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012150,000
175,000
200,000
225,000
250,000
275,000
300,000
325,000
350,000
375,000
U.S. Rail Carload Traffic: Jan. 2006 - July 2012
Data are weekly average originations for each month, are not seasonally adjusted, and excludeU.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloads:All Commodities Excluding Coal
2006 (peak year)
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2010
2011
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
% Change in U.S. Rail Carloads Excluding Coal FromSame Month Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 0.0% over July 2011 and up 4.3% over July 2010.
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloads:All Commodities Excluding Coal and Grain
2006 (peak year)
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2010
2011
-35%
-30%
-25%
-20%
-15%
-10%-5%
0%
5%
10%
15%
20%
25%
30%
% Change in U.S. Rail Carloads Excl. Coal & GrainFrom Same Month Prev. Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 1.4% over July 2011 and up 7.4% over July 2010.
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INDUSTRIAL PRODUCTS
PRIMARY METAL PRODUCTS (MAINLY IRON AND STEEL)
IRON AND STEEL SCRAP
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg. Weekly U.S. Rail Carloads: Industrial Products*
2006 (peak year)
2009
2012
*Data include chemicals; paper; metal products; autos; crushed stone and gravel; metallic ores;and stone and glass products. Data are weekly average originations for each month and excludethe U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
2010
2011
4,000
6,000
8,000
10,000
12,000
14,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloadsof Steel and Other Primary Metal Products
2012
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, exc lude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2010
2011
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
% Change in U.S. Rail Carloads of Steel and OtherPrimary Metal Products From Same Month
Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 1.7% from July 2011 and up 7.4% over July 2010.
2,000
3,000
4,000
5,000
6,000
7,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloadsof Iron and Steel Scrap
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2010
2011
2012
-80%
-60%
-40%
-20%
0%
20%40%
60%
80%
100%
120%
% Change in U.S. Rail Carloads of Iron andSteel Scrap From Same Month Previous Year:
Jan. 2009 - July 2012
2009 2010
Data are based on originations, are not seasonally adjusted and exclude U.S. operations of CNand CP. Data prior to 2009 are not available. Source: AAR Weekly Railroad Traffic
2011 2012
July 2012 was down 26.9% from July 2011 and down 2.8% from July 2010.
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
% Change in U.S. Rail Carloads of Industrial ProductsFrom Same Month Prev. Year: Jan. 2006 - July 2012*
2006 2007 2008 2009 2010 2012*Data include chemicals; paper; metal products; autos; crushed stone and gravel; metallic ores; andstone and glass products. Data are based on weekly average originations for each month andexclude the U.S. operations of CN and CP. Source: AARWeekly Railroad Traffic
2011
July 2012 was down 0.2% from July 2011 and up 6.9% over July 2010.
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CRUSHED STONE, SAND, AND GRAVEL
PETROLEUM & PETROLEUM PRODUCTS(CRUDE PETROLEUM, LPGs, ASPHALT, FUEL OIL, LUBRICATING OILS, ETC.)
MOTOR VEHICLES AND PARTS
8,000
10,000
12,000
14,000
16,000
18,000
20,00022,000
24,000
26,000
28,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Weekly U.S. Rail Carloadsof Crushed Stone, Sand, and Gravel
2006 (peak year)
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.operations of CN and CP, and reflect revisions to original reporting. Source: AAR
2010
2011
-35%-30%-25%-20%-15%-10%-5%0%5%
10%15%20%25%30%35%
% Change in U.S. Rail Carloads of Crushed Stone,Sand, and Gravel From Same Month Previous Year:
Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN andCP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 0.5% over July 2011 and up 4.7% over July 2010.
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Combined U.S. + Canadian Average Weekly RailCarloads of Petroleum and Petroleum Products
2008
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, and reflectrevisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011
-20%
-10%
0%
10%
20%
30%
40%
50%
% Change in Combined U.S. + Canadian Rail Carloadsof Petroleum & Petroleum Products From Same Month
Previous Year: Jan. 2009 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including theirU.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2009 2010 2011 2012
July 2012 was up 43.4% over July 2011 and up 48.3% over July 2010.
7,000
10,000
13,000
16,000
19,000
22,000
25,000
28,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Combined U.S. + CanadianAverage Weekly Rail Carloads of Motor Vehicles*
2008
2009
2012
*Includes parts. Data are weekly average originations for each month, are not seasonallyadjusted, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2010
2011
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
% Change in Combined U.S. + Canadian Rail Carloadsof Motor Vehicles* From Same Month Previous Year:
Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including theirU.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 23.7% over July 2011 and up 25.3% over July 2010.
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`Rail Time Indicators – August 3, 2012 Page 15 of 39
METALLIC ORES (OVERWHELMINGLY IRON ORE)
LUMBER AND WOOD PRODUCTS + PRIMARY FOREST PRODUCTS
PULP AND PAPER PRODUCTS
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Combined U.S. + CanadianAvg. Weekly Rail Carloads of Metallic Ores
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, and reflectrevisions to original reporting. Source: AAR Weekly Railroad Traffic
2012
2010
2011
-80%-60%-40%-20%
0%20%40%60%80%
100%120%140%
160%180%200%220%
% Change in Combined U.S. + Canadian Rail Carloadsof Metallic Ores From Same Month Previous Year:
Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, and reflect revisions to originalreporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 10.3% from July 2011 and up 3.4% over July 2010.
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Combined U.S. + Canadian Average Weekly RailCarloads of Lumber and Primary Forest Products
2009
2008
Data are weekly average originations for each month, are not seasonally adjusted, andreflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2012
2010
2011
-40%
-30%
-20%
-10%
0%
10%
20%
30%
% Change in Combined U.S. + Canadian Rail Carloadsof Lumber and Primary Forest Products From Same
Month Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, and reflect revisions tooriginal reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was up 3.7% over July 2011and up 43.0% over July 2010.
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
12,000
12,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Combined U.S. + Canadian Average WeeklyRail Carloads of Pulp and Paper Products
2009
2012
Data are weekly average originations for each month, are not seasonally adjusted, andreflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2008
20102011
-30%
-25%
-20%
-15%
-10%-5%
0%
5%
10%
15%
% Change in Combined U.S. + Canadian Rail Carloadsof Pulp and Paper Products From Same Month
Previous Year: Jan. 2006 - July 2012
Data are based on originations, are not seasonally adjusted, and reflect revisions tooriginal reporting. Source: AAR Weekly Railroad Traffic
2006 2007 2008 2009 2010 2011 2012
July 2012 was down 3.4% from July 2011 and down 2.2% from July 2010.
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`Rail Time Indicators – August 3, 2012
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`Rail Time Indicators – August 3, 2012 Page 18 of 39
GROSS DOMESTIC PRODUCT (GDP)
What is it and why is it important?
GDP (the output of goods and services produced by labor and property in a country) measuresthe size of an economy and how fast it’s growing. Assuming it’s measured accurately, it’sprobably the single most conclusive piece of information on the health of an economy.
The GDP figure that gets all the press is the annualized percentage change in inflation-adjustedGDP from one quarter to the next. It’s calculated by the Bureau of Economic Analysis (BEA).The BEA revises GDP several timesas more and better component databecome available. Still, because ofthe tremendous size and complexity ofthe U.S. economy, it can be verydifficult to know where we are one theexpansion/recession continuum.
GDP and freight rail traffic havehistorically been closely correlated,although rail freight traffic tends to bemore volatile than the economy as awhole. The correlation isn’t perfect,but it is strong and positive.
What are the latest numbers?
Anyone who’s followed the economyover the past few years knows it’sbeen hard to get a good read on where it is and where it’s going. Two recent newspaperheadlines illustrate this point. On July13, an article in The New York Timeswas headlined, “In Latest Data,Economists See Signs of Pickup.” OnJuly 20, The Washington Examinerhad a story headlined, “Data Add to
Signs of Slowing Recovery.”
On July 27, the BEA put itself firmly inthe “economy is slowing” camp when itannounced that its first preliminaryestimate was that U.S. GDP grew just1.5% in the second quarter of 2012,down from 2.0% in Q1 2012 and4.1% in Q4 2011 (see chart at right).
The BEA’s quarterly GDP estimatesare revised several times in ensuingmonths as better data becomeavailable, so the 1.5% estimate for Q2 2012 will likely change. In addition, once a year — most
recently on July 27 — the BEA releases revised historical GDP data going back several years.The table on the top of the next page shows those revisions, which in some cases were substan-tial. For example, the revised numbers show that economic growth in the first half of 2010 wasmuch slower than previously thought, while growth in the fourth quarter of 2011 was much faster.
A number of factors contributed to the slower growth in the second quarter of 2012:
Personal consumption expenditures, which account for more than 70% of GDP, rosean annualized 1.5% in Q2 2012, down from 2.4% in Q1 2012 and 2.0% in Q4 2011 (seetop left chart on the next page).
-24%
-20%-16%
-12%
-8%
-4%
0%
4%
8%
12%
16%
20%% Change in U.S. GDP vs. Rail Traffic
GDP in Q2 2012 is preliminary. Perc entages are year-over-year. Traffic = carloadsexcluding coal and grain + intermodal containers and trailers. Source: BEA, AAR
'01 '02 '06'04'03 '10 '11'05 '07 '08 '09 '12
bars = GDPline = rail traffic
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Quarterly Real U.S. GDP Growth: Q1 2006 – Q2 2012(annualized % change from previous quarter)
Q2 2012 is first preliminary estimate. Source: Bureau of Economic Analysis
2011 20122006 2007 2008 2009 2010
Q2 2012: 1.5% (preliminary)
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Nonresidential fixed investment — equipment, software,structures, etc. with a useful life of more than one year —rose 5.4% in the second quarter, which sounds pretty goodexcept when compared to the 12.6% average growth theprevious four quarters (top right chart below).
Government consumption expenditures have fallen foreight straight quarters, driven mainly by cutbacks in state andlocal government spending. The $9 billion reduction ingovernment consumption expenditures in Q2 2012 from Q12011 was the smallest reduction in a year.
At its peak in Q4 2005, residential fixed investment (homepurchases) accounted for 6.2% of GDP. In Q2 2012, it was2.7%. This component of GDP fell — usually sharply — in 18of the 21 quarters from Q1 2006 through Q1 2011. In the fivequarters since then, it has contributed to GDP growth butfrom a much smaller base. It will probably be years before itreturns to its pre-recession level (see chart bottom right).
Exports, which add to GDP, rose at an annualized rate of5.3% in Q2 2012 over Q1 2012, its highest rate of growth in
three quarters. However, imports — which count againstGDP — grew 6.0% in Q2 2012, slightly faster than exports, sothe net effect on GDP was negative compared to the previous quarter.
Original Revised
Q1 09 -6.7% -5.2%
Q2 09 -0.7% -0.3%
Q3 09 1.7% 1.4%
Q4 09 3.8% 4.0%
Q1 10 3.9% 2.3%
Q2 10 3.8% 2.2%
Q3 10 2.5% 2.6%
Q4 10 2.3% 2.4%
Q1 11 0.4% 0.1%
Q2 11 1.3% 2.5%
Q3 11 1.8% 1.3%
Q4 11 3.0% 4.1%
Q1 12 1.9% 2.0%
2008 -0.3% -0.3%
2009 -3.5% -3.1%
2010 3.0% 2.4%
2011 1.7% 1.8%
U.S. Real GDP Growth:
July 27, 2012 Revisions
$8,500
$8,600
$8,700
$8,800
$8,900$9,000
$9,100
$9,200
$9,300
$9,400
$9,500
$9,600
$9,700
Total Personal Consumption*(billions of inflation-adjusted 2005 $, annualized)
Source: Bureau of Economic Analysis (NIPA Table 1.1.6)
2010 20112005 2006 2007 2008 2009 2012
Up 1.5% in Q2 2012 over Q1 2012, down from a 2.4% increase in Q1 2012 over Q4 2011.
$2,150
$2,200
$2,250
$2,300
$2,350
$2,400
$2,450$2,500
$2,550
$2,600
$2,650
Total Government Consumption*(billions of inflation-adjusted 2005 $, annualized)
*Value of goods and services provided to the public such as defense and education, plusequipment, software, and structures to provide these services. Does not include governmentspending for social service programs or interest. Source: BEA (NIPA Table 1.1.6)
2010 20112005 2006 2007 2008 2009 2012
Government consumption has fallen for eight straight quarters,driven mainly by lower state and
local government spending.
$1,000
$1,100
$1,200$1,300
$1,400
$1,500
$1,600
$1,700
$1,800
Nonresidential Fixed Investment*(billions of inflation-adjusted 2005 $, annualized)
*Equipment, software, structures, etc. with a useful life of more than one year.Source: Bureau of Economic Analysis (NIPA Table 1.1.6)
2010 20112005 2006 2007 2008 2009 2012
Up 5.4% in Q2 '12 over Q1 '12, the lowest rate of increase in five quarters.
$200
$300
$400
$500
$600
$700
$800
$900
Residential Fixed Investment*(billions of inflation-adjusted 2005 $, annualized)
*Purchases of homes by households. Source: BEA (NIPA Table 1.1.6)
2010 20122005 2006 2007 2008 2009
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`Rail Time Indicators – August 3, 2012 Page 20 of 39
We last showed a variation of the table atright five months ago. It shows estimatedGDP growth in 2012 for the world’s top14 economies as forecast by theEconomist Intelligence Unit (EIU).
1The
table shows the EIU’s March 2012forecasts for 2012 GDP growth as well as
its most recent July 2012 forecasts. Formost countries, the July forecast is moreoptimistic than the one from March, andfor most countries, GDP is expected togrow faster in 2013 (see the last column).
A lot can happen to throw off forecasts,of course. On July 16, the InternationalMonetary Fund released its latest updateto its World Economic Outlook. Thelatest update forecasts 3.5% growth inglobal GDP in 2012 and 3.9% growth in2013. The IMF warned that its forecastmakes three major assumptions, none of
which are sure things:
There will be enough policy action for financial conditions in the euro area, includingGreece and Spain, to ease gradually through 2013;
U.S. fiscal policy does not tighten sharply in 2013; and
Steps by some major emerging markets to stimulate growth gain traction.
According to the IMF, the most immediate risks to the global recovery are that policymakers fail tosolve the euro area crisis
2and the United States plunges off the “fiscal cliff,” which the IMF says
would lead to “a severe decline in U.S. growth, with significant spillovers to the rest of the world.”
The IMF’s forecasts for GDP growth for individual countries are generally very similar to the EIU’sforecasts. For a summary of the IMF report, see here.
The bottom line is that the U.S. economy appears to still be in a slow-but-fragile growth mode.Whether policymakers at the Federal Reserve or elsewhere in Washington can do anything tomake the economy grow faster is an open question.
Where to go for more information:
The most recent BEA news release on GDP, including links to detailed data tables, is here. BEAwill release its second preliminary estimate of Q2 2012 GDP on August 29.
1The Economist Intelligence Unit is the research and forecasting unit of The Economist Group, the publisher of The
Economist magazine.
2Policymakers have been trying to solve the euro-zone crisis for a couple of years now. The general pattern is that
an agreement is announced and everyone is happy — politicians say optimistic things, stocks go up, etc. Usually theoptimism only lasts a short while, until it becomes clear that the agreement everyone was touting a few weeks ormonths before doesn’t actually solve anything. Then, policymakers get together again, eventually announce a newagreement, and the cycle repeats. Cynics might say there’s a parallel between what’s going on in Europe and the oldPeanuts cartoons in which Lucy offers to hold a football for Charlie Brown to kick. Every time, Lucy pulls the ballaway at the last second, and Charlie Brown goes flying. Charlie Brown knows Lucy can’t be trusted, but each timeLucy says that this time she really will hold the football, and each time Charlie Brown suspends his disbelief, only togo flying as Lucy pulls the ball away again. (Alas, Charlie Brown and the rest of the Peanuts gang are from adifferent era and thus practically unknown to many Americans today. Clickhere for a short Youtube clip from a 1966Peanuts cartoon showing the Lucy - Charlie Brown football scene.)
2013
2010 GDP March '12 July '12 July '12
($ trillions) Forecast Forecast Forecast
United States $14.45 2.0% 2.1% 2.1%
China $5.74 8.2% 8.2% 8.5%
Japan $5.46 1.6% 2.3% 1.5%
Germany $3.28 0.1% 0.8% 1.2%
France $2.56 -0.2% 0.2% 0.6%
United Kingdom $2.25 0.2% 0.1% 1.5%
Brazil $2.09 3.3% 2.0% 4.2%
Italy $2.05 -1.2% -2.0% -0.4%
India $1.72 6.3% 6.6% 7.4%
Canada $1.58 2.0% 2.1% 2.3%
Russia $1.48 3.2% 3.8% 3.9%
Spain $1.41 -1.2% -1.6% -1.0%
Australia $1.27 3.0% 3.3% 3.2%
Mexico $1.03 3.3% 3.7% 3.8%
Source: The Economist, United Nations Statistics Division
2012
Estimated GDP Growth
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PURCHASING MANAGERS INDEX (PMI) and NON-MANUFACTURING INDEX (NMI)
What is it and why is it important?
The PMI is released by the Institute for Supply Management (ISM) and combines data on neworders, inventory, production, supplier deliveries, and employment. It is based on a survey ofseveral hundred supply managers at manufacturers throughout the country and is considered anindicator both of actual “on-the-ground” conditions as well as near- to medium-term sentiment.The NMI is like the PMI, except that it tracks services.
There’s still some debate because of concerns about what currency to use and other factors, butthe consensus seems to be that China recently passed the United States to become the world’stop manufacturing country. Even if that’s true, manufacturing in the United States is still muchlarger than most people seem to realize: the value of U.S. manufacturing is larger than the entireGDP of all but eight countries.3 Much of what railroads haul consists of raw materials formanufacturing or finished manufactured goods. Services account for around two-thirds of U.S.GDP and around 80% of private-sector employment.
According to the ISM, a PMI > 50 indicates that overall manufacturing is generally expanding; aPMI < 50 indicates manufacturing is generally contracting. Likewise, an NMI < 50 indicates theservices sector overall is contracting; an NMI > 50 indicates the service sector is expanding.
What are the latest numbers? The PMI rose slightly from 49.7 in June 2012 to 49.8 in July, indicating contraction in
manufacturing for the second straight month after 34 consecutive months of expansion (asindicated by a PMI > 50 over that period). Of the 18 manufacturing industries tracked by the ISM,seven grew in July, the same number as in June and down from 13 in May and 16 in April.
The news was only marginally better for the new orders component of the PMI, which rose to48.0 in July from 47.8 in June.
What the ISM said about July’s PMI: "A growing number of comments from the panel this monthreflect a slowdown in their businesses and general concern over increasing economicuncertainty."
3Next time you’re at a party, ask people how much of U.S. consumption they think is “made in China.” (They’ll
probably look at you funny and then start slowly backing away, but ignore that.) A study by researchers at theFederal Reserve Bank of San Francisco last year (see here) found that, “Goods and services from China accountedfor only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs ofChinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carryingthe "made in China" label.” If the imported content of goods made in the U.S. is considered, Chinese imports makeup 1.9% of U.S. consumer spending, according to the study. Most of the people we asked estimated around 10%.
20
25
30
35
40
45
50
55
60
65
70
75
Data are seasonally adjusted. Source: Institute for Supply Management
Purchasing Managers Index (PMI):Jan. 2007 - July 2012
Data are seasonally adjusted. Source: Institute for Supply Management
2007 2008 2009 2010 2011 2012
New orders
Overall PMI(> 50 = m anuf. is expanding)
(< 50 = manuf. is contracting)
June '12 July '12
PMI 49.7 49.8
New Orders 47.8 48.0
20
25
30
35
40
45
50
55
60
65
70
Data are seasonally adjusted. Source: Institute for Supply Management
Non-Manufacturing Index (NMI):Jan. 2008 - July 2012
2008 2009 2010
Overall NMI(> 50 = non -manuf. is expanding)(< 50 = non-manuf. is contracting)
2011
New orders
2012
June '12 July '12
NMI 52.1 52.6
New Orders 53.3 54.3
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For its part, the NMI — which focuses on services in the same way that the PMI focuses onmanufacturing — rose slightly in July 2012 to 52.6 from 52.1 in June 2012 (see chart on thebottom right of the previous page). Eleven non-manufacturing industries (out of 18 industriestracked by the ISM) reported growth in July, down from 12 in June and 13 in May.
The new orders component of the NMI also rose slightly, to 54.3 in July from 53.3 in June.Ten industries reported growth in new orders in July, compared with 11 in June and 12 in May.
Where to go for more information: The ISM’s press release on the July PMI is here. August’s PMI will be released on September 4.
The ISM’s press release on the July NMI is here. August’s NMI will be released on September 6.
MANUFACTURING INVENTORIES AND SALES
What is it and why is it important?
Firms don’t want to hold too much inventory because it costs money to store and it can becomeobsolete or spoil. Plus, inventory earns no return on investment. But firms don’t want too littleinventory either, or they could lose sales. Like Goldilocks, they want inventory that’s “just right.”
When sales fall, inventories must rise if production is kept at the same pace. Eventually, when
inventories are too high, “destocking” occurs via production cuts. This leads to job losses, fewerraw material purchases, and other negative economy-wide effects. When sales rise, eitherinventories must fall, production must increase, or both. Eventually, inventories become too lowand “restocking” occurs via production increases. This means more employment, more rawmaterial purchases, and other positive economy-wide effects.
Manufacturing inventory and sales data come from the Census Bureau and are based on surveysfrom manufacturing establishments with $500 million or more in annual shipments (about 4,300reporting units), broken down into 89 industry categories.
What are the latest numbers? Manufacturing sales fell 1.1% ($5.3 billion) in June 2012 from May 2012 to $469.9 billion,
their biggest month-to-month decline since March 2009. Manufacturing sales in June 2012were 2.9% higher than they were in June 2011, the lowest such increase since December 2009
(see chart below right).
$300
$325
$350
$375
$400
$425
$450
$475
$500
$525
$550
$575
$600
$625
Data are seasonally adjusted but not adjusted for inflation. Source: Census Bureau
Manufact. Sales & Inventories: Jan. 2007 - June 2012($ billions)
Manufacturinginventories
2007 2008 2009 2010 2011 2012
recession
Manufacturing sales
-28%
-24%
-20%-16%
-12%
-8%
-4%
0%
4%
8%
12%
16%
Data are seasonally-adjusted but not adjusted for inflation. Source: Census Bureau
% Change in Manufacturing Sales From Same MonthPrevious Year: Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
June 2012: +2.9%
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Manufacturing inventories grew 0.1% in June to $605.4 billion (see the line in chart on thebottom left of the previous page). The resulting inventory-sales ratio for manufacturing was1.29 in June 2012, its highest point since June 2010.
As we noted back in June, at the same time that the Census Bureau reports on manufacturingsales and inventories, it also reports on new orders for manufacturing. The chart above leftshows that new orders for all manufacturing fell 0.5% in June, the third month in the past four thatthey have fallen. Most economists didn’t expect that. The chart above right shows that neworders excluding volatile transportation orders (aircraft orders, included in transportation, areespecially volatile) fell 1.8% in June, their biggest decline since March 2009.
The figures in this section will be revised next month as new and better input data becomeavailable, so they could change. For now, though, while they don’t necessarily portend doom andgloom ahead, neither do they give reason for much optimism. In other words, we have more ofthe same difficulty in determining where the economy is and where it’s going.
Where to go for more information: The Census Bureau’s report on manufacturing sales and inventories in June is here. July 2012
data will be released on August 31.
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180$200
Data are seasonally adjusted. Source: Census Bureau
Gap Between Manufacturing Inventories andManufacturing Sales: Jan. 2007 - June 2012
($ billions)
2007 2008 2009 2010 2011 2012
-9%-8%
-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%
Data are seasonally-adjusted but not adjusted for inflation. Source: Census Bureau
% Change in Manufacturing New Orders FromPrevious Month: Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
June 2012: -0.5%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Data are seasonally-adjusted but not adjusted for inflation. Source: Census Bureau
% Change in Manufacturing New Orders Excl. Transp.From Previous Month: Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
June 2012: -1.8%
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
2007 2008 2009 2010 2011
Data are seasonally adjusted. Source: Census Bureau
Inventory-Sales Ratio for Manufacturing:Jan. 2007 - June 2012
2012
June 2012 = 1.29
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INDUSTRIAL PRODUCTION
What is it and why is it important?
Industrial production figures, which come from the Federal Reserve, are based on the monthlyraw volume of goods produced by U.S. industrial firms such as factories, mines, and electricutilities. Data are obtained from a variety of government and industry sources. Manufacturingaccounts for about 75% of industrial production, utilities and mining for the remainder.
What are the latest numbers? U.S. industrial production rose 0.4% in June 2012 over May 2012, continuing an up-one-
month-down-the-next pattern that’s held for the past five months (see top right chart below). InQ2 2012, it rose 2.2%, down from 5.8% in Q1 2012 (see the top left chart on next page).
The all-time peak for U.S. industrial production was December 2007. As of June 2012, 54months later, industrial production was still only at 96.7% of the peak (see top left chart below).Not since the post-World War II period, when there was a huge industrial drawdown, has morethan 54 months passed between one peak in U.S. industrial production and another. At the post-June 2009 rate of increase, it will take approximately another year and a half for industrialproduction to return to where it was in December 2007.
The manufacturing component of industrial production rose 0.7% in June 2012 over May2012, also continuing its recent up-down pattern (see bottom right chart below). It’s now at93.9% of its pre-recession peak (see bottom left chart below). In Q2 2012, manufacturing outputrose 1.4%, down sharply from the 9.8% gain in Q1 2012 (see top right chart on next page).
75
80
85
90
95
100
105
110
Data are seasonally adjusted. Source: Federal Reserve
U.S. Industrial Production: Jan. 2007 - June 2012(Jan. 2007 = 100)
2007 2008 2009 2010 2011 2012
Dec. 2007 = all-time peak
June 2012 = 96.7% of peak
June 2009 =82.8% of peak
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
Data are seasonally adjusted. Source: Federal Reserve
Overall U.S. Industrial Production:% Change From Previous Month
Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
hurricanes
June 2012: +0.4%
-4%
-3%
-2%
-1%
0%
1%
2%
Data are seasonally adjusted. Source: Federal Reserve
Manufacturing % Change From Previous Month:Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
June 2012: +0.7%
75
80
85
90
95
100
105
110
Data are seasonally adjusted. Source: Federal Reserve
U.S. Manufacturing Output: Jan. 2007 - June 2012(Jan. 2007 = 100)
2007 2008 2009 2010 2011 2012
Dec. 2007 = all-time peak
June 2012 = 93.9% of peak
June 2009 =79.3% of peak
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The charts above show changes in output for several key industrial sectors. Note the big drop iniron and steel output in June. After big increases in most of 2011, output of railroad rolling stockhas fluctuated within a narrow band. The charts below are variants of charts we show eachmonth. There is a very strong positive correlation between rail traffic and industrial production,both overall and for many industrial sectors.
50
60
70
80
90
100
110
120
130
U.S. Industrial Production: Select SectorsJan. 2007 - June 2012
(Jan. 2007 = 100)
2009 20112007 2008 2010
Data are seasonally adjusted. Source: Federal Reserve
2012
Wood
Paper
Chemicals
Iron & steel
30
40
50
60
70
80
90
100
110
120
130
U.S. Industrial Production: Select SectorsJan. 2007 - June 2012
(Jan. 2007 = 100)
2009 2011
Data are seasonally adjusted. Source: Federal Reserve
2007 2008 2010 2012
Cement
RR rollingstock
Gas & elec. utilities
Motor vehicles & parts
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Data are seasonally adjusted. Q2 2012 is preliminary. Source: Federal Reserve
Manufacturing Output:% Change From Previous Quarter
Q1 2007 - Q2 2012
2007 2008 2009 2010 2011 2012
Q2 2012: +1.4%
-20%
-15%
-10%
-5%
0%
5%
10%
Data are seasonally adjusted. Q2 2012 is preliminary. Source: Federal Reserve
Overall U.S. Industrial Production:% Change From Previous Quarter
Q1 2007 - Q2 2012
2007 2008 2009 2010 2011 2012
Q2 2012: +2.2%
420,000
440,000
460,000
480,000
500,000
520,000
540,000
560,000
580,000
70
75
80
85
90
95
100
105
110
*Carloads + intermodal units Data are seasonally adjusted. Source: Federal Reserve, AAR
Total U.S. Industrial Production vs.Total U.S. Rail Traffic*
2007 2010 2012201120092008
correlation = 95%
recession
Industrialproduction(left scale,
Jan. 2007=100)
Rail traffic (right scale)*
65,000
80,000
95,000
110,000
125,000
140,000
155,000
170,000
185,000
70
75
80
85
90
95
100
105
110
*Computers, communications eq., and semiconductors . Data are seasonally adjusted.Source: Federal Reserve, AAR
Manufacturing Output Excluding Hi-Technology* vs.U.S. Rail Carloads Excluding Coal & Grain
2007 2010 2012201120092008
correlation = 97%
recession
Manufacturingoutput
(left scale,Jan. 2007=100)
Rail carloads (right scale)
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We noted on page 18 that the BEA revises each quarter’s GDP figures a couple of times in themonths immediately following their release. Once a year (usually in July), a broader revisionoccurs, when revised GDP figures for potentially many years in the past are released. Therevisions can be significant.
It’s the same with industrialproduction. The chart at right showsthe percentage change in industrialproduction from the previous monthfrom January 2010 through April 2012in two ways: 1) as originally released;and 2) after revisions. In somemonths the differences are minor, butin some months they are not.
For example, in its release on April 15,2010, the Federal Reserve reportedthat industrial production in March2010 was 0.1% higher than it was inFebruary 2010. Today, followingseveral revisions since then, Federal
Reserve data indicate that industrial production in March 2010 was actually 0.6% higher than itwas in February 2010, not 0.1%. More recently, industrial production in January 2012, February2012, and March 2012 were all initially reported as unchanged, but after revisions the comparablefigures are now +0.7%, +0.4%, and -0.5%, respectively.
We point this out not to be critical of the Federal Reserve, but simply as a reminder that there isoften a fundamental tension between the timeliness of economic data and their accuracy. As withpeople, with data first impressions are not always accurate.
4
Where to go for more information:
The Federal Reserve release on industrial production in June 2012, which includes informationon a wide variety of industries and industry aggregates, is here. July 2012 data will be releasedon August 15.
CAPACITY UTILIZATION
What is it and why is it important?
Capacity utilization attempts to capture the concept of sustainable maximum output — i.e ., thehighest output a plant can maintain assuming a realistic work schedule, normal downtime, andsufficient availability of inputs to operate the capital in place.
In theory, a capacity utilization rate of, say, 70% means there is room to increase production up to100% without having to build new plants or add equipment. In practice, capacity utilization rates(at least on an economy-wide basis) never come close to 100%. Utilization levels above 82%-85% are generally considered "tight" and portend price increases or supply shortages in the nearfuture. The farther below this level, the more slack there is in the economy or particular sector.
Firms everywhere walk a tightrope when it comes to capacity. If they take too long to bring backidled capacity or build new capacity, they risk shortages and lost sales. Or, they could facehigher costs in other areas (e.g ., higher overtime costs). On the other hand, adding capacity thatends up not being used adds costs with no offsetting returns.
4As information, rail traffic data as reported in Rail Time Indicators are subject to revision up to one year following
their initial release, but the revisions are almost always insignificant.
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Original Final
Original vs. Final Revised % Change in IndustrialProduction From Prev. Month: Jan. 2010 - April 2012
Source: Federal Reserve
2010 2011 2012
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What are the latest numbers? Overall U.S. capacity utilization rose to 78.9% in June 2012 from a revised 78.7% in May,
while capacity utilization for manufacturing rose to 77.7% in June from 77.3% in May (seechart below left). Over the past six months, capacity utilization, like industrial production, hasbeen up one month and down the next, with the increases washing out the decreases.
The chart below right shows recent changes in capacity utilization for several major industrial
sectors. Note the big drop in capacity utilization for iron and steel since late 2011, consistent withrecent declines in rail carloads of iron and steel products (see page 13). Capacity utilization forchemicals has been trending down over the past six months (as have rail carloads of chemicals — see page 10), but it rose in June for the first time in six months.
Utilization is one side of the capacity coin. The other side is the actual amount of capacityavailable. We’ve noted often before that the recession saw the loss of large amounts of U.S.industrial capacity, especially in manufacturing, but it might surprise you to know that U.S.manufacturing capacity is lower today than it was when the recession ended. The chart below
left shows changes in capacity for several key sectors from June 2009 (the official end of therecession) through June 2012. Total manufacturing capacity, which had fallen 2.6% from thebeginning of the recession in December 2007 through the end of the recession in June 2009, was2.7% lower in June 2012 than it was in June 2009 — i.e ., capacity continued to fall after therecession ended. The chart below right shows that manufacturing capacity has risen somewhatsince bottoming out in April 2011, but it’s still well below its February 2008 peak.
62%
64%
66%
68%
70%72%
74%
76%
78%
80%
82%
84%
Data are seasonally adjusted. Source: Federal Reserve
U.S. Capacity Utilization: Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
Overall
Manufacturing
recession
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011
Data are seasonally adjusted. Source: Federal Reserve
Capacity Utilization by Sector: Jan. 2007 - June 2012
2012
Paper
Chemicals
Motor vehicles Wood products
Iron & steel
92
94
96
98
100
102
104
106
108
110
112
114
2007 2008 2009 2010 2011
Data are seasonally adjusted. Source: Federal Reserve
U.S. Industrial Capacity(Dec. 2007 = 100)
2012
Overall industrial capacity
Manufacturing capacity
Gas and electric utility capacity
Mining (including oil& gas) capacity
Total-1.1%
Manufact.-2.7%
Chemicals-8.6%
Motor
vehicles0.7%
Iron &steel-4.3% Paper
-8.4%Wood products
-11.2%
Gas & electricutilities10.0% Oil & gas
extraction12.6%
Coal mining-6.4%
Source: Federal Reserve
% Change in Industrial Capacity by Sector FromJune 2009 to June 2012
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Where to go for more information:
The Federal Reserve release on capacity utilization in June 2012 is here. July 2012 data will bereleased on August 15.
NUMBER OF EMPLOYED PERSONS AND UNEMPLOYMENT RATE
What is it and why is it important?
Released by the Bureau of Labor Statistics, the figures provide a snapshot of the strength of theU.S. labor market. Because of their visibility and political importance, they are probably the singlemost anticipated and widely publicized economic indicators in the world.
They are based on two separate surveys: 1) an “establishment survey” that uses payrolldata from around 486,000 businesses, and 2) a “household survey” of around 55,000 house-holds. The net number of jobs gained or lost in a month and employment by industry come fromthe survey of businesses. The unemployment rate, the size of the labor force, and the labor forceparticipation rate, among others, come from the household survey. The two sometimes producepuzzling results. For example, in the same month there can be a sharp drop in the unemploy-ment rate (household survey) without many new jobs being created (establishment survey).
In the United States, a gain of 150,000 or more jobs from one month to the next is generallyconsidered solid job growth. (Average monthly U.S. job growth from September 2003 throughDecember 2007 was 157,000 jobs.) Job growth of 100,000-120,000 is needed just to keep upwith the typical growth in the labor force from one month to the next.
Employment is often considered a lagging indicator because employers often decide to wait untilthey’re sure an economic recovery is here to stay before making new permanent hires. In themeantime, they might rely on more hours for existing workers or on temporary workers. Weak jobnumbers cause even the still-employed to become less confident of the future, and, therefore,less prone to spend money (see “Consumer Confidence” and “Retail Sales” below).
What are the latest numbers?
It could be worse: 163,000 net new jobs were created in July 2012, up from a revised 64,000 inJune 2012 and the highest monthly increase in five months (see chart below left). 5
Unfortunately, the official unemployment rate rose to 8.3% in July. The unemployment ratefor men stayed at 8.4%; the unemployment rate for women rose to 8.1% from 8.0%.
5See here for a short but interesting piece from The New York Times on why issues related to seasonal adjustment
make the July jobs report potentially less accurate than other months.
-900-800-700-600-500-400
-300-200-100
0100200300400500600
0 0 0 s
Change in U.S. Non-Farm Employment:Jan. 2007 - July 2012*
*Change from previous month. Figures are seasonally adjusted. Source : BLS
2007 20102008 2009 2011 2012
Red dots are roughly where bars would be if census-related employment were excluded.
Feb '12 259,000
Mar '12 143,000
Apr '12 68,000May '12 87,000
June '12 64,000
July '12 163,000
3%
4%
5%6%
7%
8%
9%
10%
11%
12%
U.S. Unemployment Rate: Jan. 2007 - July 2012*
The official U.S.unemployment rate rose to 8.3% in July 2012 from 8.2% in June.
*Civilian labor force, seasonally adjusted. Source: Bureau of Labor Statistics
2007 20102008 2009 2011 2012
Men
Overall
Women
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No doubt, July’s gain of 163,000 jobs is an improvement over recent months and if we were in themidst of a normal recovery, it would bea sign of a fairly healthy labor market.But that’s not where we are. The chartat right, which we last included inNovember, shows that the number ofemployed persons peaked in January
2008 at 138.0 million, bottomed out at129.2 million in February 2010, and asof July 2012 was 133.2 million — 4.0million more than February 2010’s lowpoint and 4.8 million fewer thanJanuary 2008’s high point. In otherwords, the economy still hasn’trecovered half the jobs that were lost.
And it will be a while until it does. IfJuly’s gain of 163,000 net new jobscontinues each month into the future,it will take until December 2014 to get back to 138.0 million jobs. If job gains fall to just 100,000per month — more than the average of 73,000 jobs gained each month in Q2 2012 — it will take
until July 2016 to get back to 138.0 million jobs. Even if job growth rises to 200,000 new jobseach month, it will still take until July 2014 to get back to where we were.
Total private sector jobs rose by 172,000 in July; total government jobs, including the post office,fell by 9,000. Industries with net job gains in July 2012 included leisure and hospitality (mainlyhotels and restaurants — +27,000), manufacturing (+25,000); temporaries (+14,000); health care(+12,000); retail sales (+7,000); and transportation and warehousing (+7,000). Constructionemployment fell by 1,000 jobs in July.
Back in April 2012, we said that when an increasing number of people quit their jobs, it’s usually asign of confidence in the job market, and that was what we were seeing. Well, we take it back.The chart below left shows that the percentage of unemployed people who voluntarily left their jobfell to 6.9% in July, down from the 8.7% in March that we reported on in April.
The chart below right shows that initial unemployment claims trended downward in July and arebelow the 400,000 threshold often considered the signal of an unhealthy labor market.
Where to go for more information: The July 2012 BLS employment report is here. Data for August 2012 will be released on
September 7.
200,000
250,000300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
700,000
Weekly Initial Unemployment Claims:Jan. 2007 - July 2012
Figures are 4-week moving averages. Source: U.S. Department of Labor
2007 20102008 2009 2011 2012
400,000 is generally considered the threshold below which the economy is thought to be adding jobs at a decent pace.
128
130
132
134
136
138
140
142
Hypothetical Employment Paths
Peak = 138.0 million Jan. 2008
Trough = 129.2 million Feb. 2010
Source: Bureau of Labor Statistics
Number of Employed Persons – When Will We Return to Peak Levels?
Hypothetical
Actual
+163,000 = December 2014
+100,000 = July 2016
+200,000 per month
= July 2014
Jan. 2006 July 2012
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
Voluntary "Job Leavers" as a % of the Unemployed:Jan. 2007 - July 2012
Data are seasonally adjusted. Source: Bureau of Labor Statistics
2007 20102008 2009 2011 2012
July 2012 = 6.9%
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CLASS I FREIGHT RAILROAD EMPLOYMENT
What is it and why is it important?
As in other industries, employment on freight railroads is largely a function of the level ofbusiness, though there is a not-insignificant level of seasonality (e.g ., all else equal, the numberof railroad maintenance of way employees is higher in the spring and summer than in the winter,when rail construction projects are far more difficult. Rail employment numbers are reportedmonthly by Class I railroads to the Surface Transportation Board.
What are the latest numbers? Class I freight railroad employment in June 2012 rose to 163,159. That’s its highest level since
October 2008, up 611 employees (0.4%) over May 2012, up 3,819 employees (2.4%) overJune 2011, and down 5,423 employees (-3.2%) from the November 2006 peak of 168,582 (seechart below left — figures for prior months back to November 2011 were recently revised.)
If you’re not in the rail industry, you probably don’t know that railroad employees are not coveredby Social Security but instead are covered by Railroad Retirement, a government–managedpension plan begun in the 1930s. Railroad Retirement has two components, or “tiers.” Tier I isfunctionally equivalent to Social Security, both in terms of tax rates and benefits. Tier II isfinanced by an additional payroll tax that can vary a bit from year to year but which in 2012 is12.1% for rail employers and 3.9% for rail employees. The average Railroad Retirement benefitpayable to a retired rail employee is generally higher than the average Social Security benefit,consistent with the higher taxes paid by rail employers and employees and the higher thanaverage wages a rail industry employee typically earns.
6
The chart above right shows that the rail workforce skews much older than the overall U.S.workforce. In 2010, for example, 27% of the rail workforce was at least 55 years old, comparedwith 20% of the overall U.S. workforce. For years to come, railroads will be hiring thousands ofnew employees each year to replace those who retire, in addition to any needed to handle
increased traffic volumes that railroads expect to carry in the years ahead.Where to go for more information:
The STB web site for railroad employment data is here.
6In 2010, the average U.S. freight railroad employee had annual wages of $73,000 and annual total compensation of
$103,120. Comparable figures for the average U.S. full-time employee were $53,000 and $66,000, respectively.
135,000
140,000
145,000
150,000
155,000
160,000
165,000
170,000
Class I Railroad Employment: Jan. 2005 - June 2012
Beginning in January 2010, the bars in this chart are around 1,000 employees higher than inprevious months due to the inclusion of employees fr om two large railroads acquired by aClass I railroad. Data are non-seasonally adjusted. Source: STB
2005 2006 2007 2008 2009 2010 2011 2012
May 2012 toJune 2012: +611
0%
5%
10%
15%
20%
25%
30%
<24 25-34 35-44 45-54 > 55
Age
U.S. rail workers
All employed civilians
Source: Railroad Retirement Board, BLS Data are for 2010.
Age Distribution of U.S. Rail Employeesvs. U.S. Civilian Workforce
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CONSUMER CONFIDENCE
What is it and why is it important?
The two best known surveys of consumer confidence come from the Conference Board and fromThomson Reuters / the University of Michigan. They are based on monthly interviews withseveral thousand people and are designed to gauge the financial health, spending power, andconfidence of the average U.S. consumer. The theory is that the more confident consumers areabout their job prospects, income, etc., the more likely they are to buy stuff, especially big-ticketitems. As David Wyss (the chief economist at Standard & Poor’s) has said, “A confidentconsumer buys a new car. A cautious consumer repairs the old one.”
Consumers’ attitudes are most heavily influenced by various economic factors, such as theunemployment rate, income, and gasoline prices. Because there is always going to be some“noise” and month-to-month volatility in consumer confidence, trends are more important than asingle data point. In addition, consumers’ sentiment is likely to be influenced by the tone andfrequency of what they hear or read (on television, in newspapers, on the Internet, etc.), ratherthan solely by the economic fundamentals they face or think they will face.
What are the latest numbers?
The Conference Board’s consumer confidence index rose to 65.9 in July 2012 from 62.7 in
June, its first increase after four straight monthly declines (see chart below left). A reading of 90or above is generally thought to indicate a healthy economy.
Meanwhile, the Thomson Reuters/University of Michigan index of consumer sentiment fellfor the second straight month in July, to 72.3 from 73.2 in June (see chart below right).
What the Conference Board said about its July index: “Despite this month's improvement inconfidence, the overall Index remains at historically low levels. Consumers' attitude regardingcurrent conditions was little changed in July, but their short-term expectations, which had declinedlast month, bounced back. However, while consumers expressed greater optimism about short-
term business and employment prospects, they have grown more pessimistic about theirearnings. Given the current economic environment — in particular the weak labor market —consumer confidence is not likely to gain any significant momentum in the coming months”
What Thomson Reuters/Univ. of Michigan said about its July index: “Consumer confidenceslipped in July, with all of the overall decline in how consumers viewed future prospects for thenational economy. The good news is that consumers do not expect the economic slowdown toprompt an economy-wide recession; the bad news is that consumers do not expect the pace ofeconomic growth to revive job and income prospects.”
0
10
20
30
40
50
60
70
80
90
100
110
120
Conference Board Index of Consumer Confidence:Jan. 2007 - July 2012
(1985 = 100)
2007 2008 2009 2010 2011 2012
Source: Conference Board
2007 2008 2009 2010 2011 2012
Up to 65.9 in July from 62.7 in June.
0
10
20
30
40
5060
70
80
90
100
110
120
Thomson Reuters/Univ. of MichiganIndex of Consumer Sentiment: Jan. 2007 - July 2012
2007 2008 2009 2010 2011 2012
Source: Thomson Reuters/University of Michigan
2007 2008 2009 2010 2011 2012
Down to 72.3 in July from 73.2 in June.
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The charts above show two other gauges of consumer or business confidence. The “SmallBusiness Optimism Index” is based on a monthly survey of several hundred randomly-chosenmembers of the National Federation of Independent Business. The “Daily Economic Confidence
Index” is based on daily Gallup telephone interviews with approximately 1,500 adults nationwide.Both are generally consistent with the Conference Board and TR/U of M indexes.
Where to go for more information:
The Conference Board’s press release on July’s consumer confidence index is here; August’s will be released on August 28. The Thomson Reuters/U. of Michigan summary report for July is here.
RETAIL SALES
What is it and why is it important?
The Census Bureau surveys 5,000 retailers of all types to track the dollar value of physicalmerchandise sold. The data are adjusted for holiday differences and seasonal variations but are
not adjusted for inflation. Personal consumption accounts for approximately 70% of U.S. GDP.Thus, the health of the economy depends largely on how much goods and services people buy.
What are the latest numbers? U.S. retail sales fell in June 2012 for the third straight month, the first time that’s happened
since the last three months of 2008. Retail sales of $401.5 billion in June were 0.5% ($1.9 billion)lower than in May.
-70
-60
-50
-40
-30
-20
-10
0
Gallup Daily Economic Confidence Index:Jan. 2008 - July 2012
Data are 3-day rolling averages. Source: Gallup
2008 2009 2010 2011 201270
75
80
85
90
95
100
Small Business Optimism Index:Jan. 2007 - June 2012
(1986 = 100)
Source: National Federation of Independent Business
2007 2008 2009 2010 2011 2012
$310
$320
$330
$340
$350
$360
$370
$380
$390
$400
$410
$420
Data are seasonally adjusted but are not adjusted for inflation. Source: Census Bureau
Total Retail Sales: Jan. 2007 - June 2012($ billions)
2007 2008 2009 2010 2011 2012
$401.5 billion in June 2012
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
Data are seasonally adjusted but are not adjusted for inflation. Source: Census Bureau
% Change in Total Retail Sales from Previous Month:Jan. 2007 - June 2012
2007 2008 2009 2010 2011 2012
June 2012: -0.5%
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NEW LIGHT VEHICLE SALES
What is it and why is it important?
Data cover U.S. sales of cars and light trucks, including pickups and SUVs. Over the past 50years, spending on motor vehicles has accounted, on average, for about 3.7% of U.S. GDP.Monthly auto sales are often referred to in terms of seasonally-adjusted annualized rates (SAAR).In 2011, 6% of U.S. Class I railroad gross revenue came from hauling autos and auto parts.
What are the latest numbers? New light vehicle sales (passenger cars, SUVs, minivans, and pickups combined) were an
annualized 14.0 million in July 2012, down from a revised 14.3 million in June 2012 (see chartbelow left) and up 13.6% over July 2011 (see chart below right). After rising steadily in thesecond half of 2011, light vehicle sales have essentially plateaued for the past five months.
Analysts blame the usual suspects for the fact that vehicle sales aren’t higher: weak consumerconfidence, anemic job growth, uncertain tax policy, and higher savings rates, for example.
Ever the optimists, at least in public, major automobile manufacturers are predicting higher salesin the second half, in part because they think their lineup of new models will be appealing toconsumers. We hope they’re right, but economic fundamentals will continue to play the key role.The chart on the bottom left, which we show every once in a while, shows the relatively strongnegative correlation between light vehicle sales and the unemployment rate.
6
7
8
9
10
11
12
13
14
15
1617
18
New U.S. Light Vehicle Sales: Jan. 2007 - July 2012*(seasonally-adjusted annualized rate in millions)
*Data include passenger cars, SUVs, minivans, and pickups. Source: BEA
2008 2009 20102007 2011
"Cash For Clunkers"
2012
14.0 million in July 2012
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Data are based on seasonally adjusted annual rates for each month. Source: BEA
Year-Over-Year % Change in U.S. Light Vehicle Sales:Jan. 2007 - July 2012
2007 2008 2009 2010 2011 2012
July 2012: 13.6%
Distorted by "CashFor Clunkers"
0
4,000
8,000
12,000
16,000
20,000
24,000
28,000
32,000
400
600
800
1,000
1,200
1,400
1,600
U.S. Light Vehicle Sales vs. U.S. + Canadian RailCarloads of Motor Vehicles & Equipment
*Passenger cars, SUVs, minivans, and pickups in 000s, 4-month moving avg. Rail carloads areweekly avgs per month, 4-month moving avg. Data are not seasonally adjusted. Source: AAR, BEA
correlation = 91%
2008 2009 20102007 2011 2012
Bars = vehicle sales*(left scale)
Line = rail carloads(right scale)
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%7
8
9
10
11
12
13
14
15
16
17
18
U.S. Light Vehicle Sales vs. Unemployment Rate*
*Passenger cars, SUVs, minivans, and pickups. Data are seasonally adjusted. Source: BEA, BLS
2008 2009 20102007 2011
correlation = -75%
2012
Unemployment rate (right scale)
Light vehicle sales*(left scale)
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There has been a spate of newsreports recently on the (we hope)nascent recovery in the housingsector (see the section on housingstarts below), and several of thosereports have mentioned a connectionbetween a housing recovery and
higher sales of pickup trucks, whichcomprise the majority of the “lighttruck” portion of vehicle sales. Just forfun, we graphed light truck sales andhousing starts. The results are shownin the chart at right. There really is apositive correlation, especially overthe past three and a half years.
Where to go for more information:
BEA data on auto sales are here.
HOUSING STARTS
What is it and why is it important?
A housing start is beginning the foundation of a residential home. Historically, housing hasdirectly accounted for around 5% of the overall economy and has large spillover effects on othersectors (such as retail sales and manufacturing), since people buying new homes tend to spendon other goods such as furniture, lawn and garden supplies, and appliances.
Since January 2006, single family homes have accounted for 79% of housing starts and multi-family buildings 21%. Housing starts, especially for multi-family buildings, often fluctuateconsiderably from month to month, so trends are more important than a particular point in time.
What are the latest numbers? Seasonally adjusted housing starts totaled an annualized 760,000 in June 2012, up 6.9%
from a revised 711,000 in May 2012 (see chart below right) and up 23.6% over June 2011 (seechart on the top left of the next page). July marks the most housing starts since October 2008and is a continuation of a very slow recovery over the past seven or eight months.
0
200
400
600
800
1,000
1,200
1,400
1,600
U.S. Housing Starts: Jan. 2007 - June 2012(seasonally-adjusted annualized rate, 000s)
Source: Census Bureau
2007 2008 2009 2010 2011 2012
Single-family units
Multi-family units
Total
About what a healthyhousing market would be
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
% Change From Previous Month inU.S. Housing Starts: Jan. 2007 - June 2012
Source: Census Bureau
2007 2008 2009 2010 2011 2012
June 2012: +6.9%
0
200
400
600
800
1,000
1,200
1,400
1,600
0
2
4
6
8
10
12
14
16
18
U.S. Light Truck Sales vs. Housing Starts*
Light trucks are SUVs, minivans, and pickups in millions at seasonally adjusted annual rates.Housing starts in thousands at seasonally adjusted annual rates. Sources: BEA, Census Bureau
2008 2009 20102007 2011
correlation = 84%
2012
Housing starts (right scale)
Light truck sales*(left scale, millions)
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`Rail Time Indicators – August 3, 2012 Page 36 of 39
Back in June we quoted a housing market analyst who had said, “It’s very clear now that thehousing market has turned a corner. The only question is how strong the rebound is going to be.”We were skeptical, noting that people have said similar things many times over the past fewyears. But this time, maybe our skepticism was unwarranted. Consider:
The National Association of Home Builders recently announced that builder confidence in
the market for newly built, single-family homes rose six points to 35 in July 2012, bringingthe index to its highest level since March 2007. The index was at 15 in July 2011.
S&P/Case-Shiller recently announced that housing prices rose in May from April in all 20metropolitan areas it tracks. Average prices rose 0.9%, their fourth straight increase.
New homes under construction rose to 482,000 (annualized) in June 2012, up from472,000 in May and 464,000 in April (see chart below left). The trend has been slowlybut clearly upward since the end of 2011.
Total construction spending rose 0.4% in June 2012 to $842.1 billion (see chart belowright), reaching its highest level since November 2009.
In short, the chief economist of the National Association of Home Builders could very well be rightwhen he recently said, “Housing — though still in a fragile stage of recovery — is returning to its
more traditional role of leading the economy out of recession.” Unfortunately, because thehousing sector is a shadow of its former self, even if it booms — which isn’t going to happenanytime soon — its effect on the economy won’t be huge. Still, every little bit helps.
Where to go for more information:
The Census Bureau’s press release on housing starts in June 2012 is here.
0
250
500
750
1,000
1,250
1,500
U.S. Housing Units Under Construction:Jan. 2007 - June 2012
(seasonally-adjusted annualized rate, 000s)
Source: Census Bureau
2007 2008 2009 2010 2011 2012
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
% Change in U.S. Housing Starts From the SameMonth Previous Year: Jan. 2007 - June 2012
Source: Census Bureau
2007 2008 2009 2010 2011 2012
June 2012: +23.6%
0
1,500
3,000
4,500
6,000
7,500
9,000
10,500
12,000
13,500
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
U.S. Housing Starts vs. U.S. + Canadian RailCarloads of Lumber, Wood & Forest Products
Data are seasonally adjusted. Housing starts are monthly figures annualized. Rail carloads areaverage weekly originations for the month. Source: AAR, Census Bureau
2007 2008 2009 2010 2011 2012
Rail carloads (right scale)
correlation = 96% Housing starts
(left scale, in 000s)
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
U.S. Construction Spending: Jan. 2007 - June 2012(seasonally-adjusted annualized rate, $ millions)
Source: Census Bureau
2007 2008 2009 2010 2011 2012
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`Rail Time Indicators – August 3, 2012 Page 37 of 39
CONSUMER PRICE INDEX (CPI)
What is it and why is it important?
The CPI is the benchmark inflation guide for the U.S. economy. It measures the changes in thecost of a representative basket of consumer goods and services. The BLS collects prices frommore than 20,000 retail and service establishments throughout the country.
The “CPI for All Urban Consumers” (CPI-U) is the inflation index you usually read about, but the“core” CPI — CPI less food and energy — is also commonly used. That’s because while foodand energy are a big part of most household budgets, their prices tend to change often and/ordramatically, and a big price change in one period is often not followed by another large changein the same direction in the following period. Thus, it’s thought that leaving them out can beuseful in assessing broader inflation trends.
It’s hard not to have at least some inflation when an economy is growing, but inflation can harmeconomies in many ways. Just one example: it confuses price signals — producers don’t know ifhigher prices are part of an inflation-related adjustment, or if they signal higher demand thatwarrants expanded production. The Federal Reserve’s target for inflation for the U.S. is 2%.
What are the latest numbers?
The overall CPI was unchanged in June 2012 as a drop in the price of energy and transpor-tation was offset by increases (albeit small ones) in the prices of just about everything else. Forthe year ending in June, the overall CPI was up 1.7% — the same as the month before and equalto the lowest year-over-year increase since January 2011 (see chart below right). CPI excludingfood and energy was up 0.2% in June 2012 and up 2.2% for the year ending in June 2012.
Energy prices fell for the third straight month in June (see the top left chart on the next page),thanks largely to a decline in gasoline prices (see the top right chart on the next page). Theaverage nationwide price of gasoline in the week ending June 2 was $3.73. For the week endingJune 30, it was $3.49, or 23 cents lower. As the chart on the top right of the next page shows,
though, average gasoline prices were about 15 cents higher in July than in June, which will putupward pressure on the CPI for July. (July’s CPI will be released August 15.)
You’ve probably heard that a severe drought and extremely hot weather in major grain-growingareas in July turned what a month ago was a very promising harvest into something much lessthan that. How much less won’t be known for sure until the harvest, but the damage is thought tobe considerable. The USDA reports, for example, that during the two weeks ending July 24, 64%of the contiguous United States was experiencing drought conditions. It was even worse inmajor grain producing areas: in the two weeks ending July 24, nearly 90% of the nation’s cornand soybeans were in locations experiencing drought.
-2.0%
-1.6%
-1.2%
-0.8%
-0.4%
0.0%
0.4%
0.8%
1.2%
Month-to-Month Change in the Consumer Price Index:Jan. 2007 - June 2012*
2007
*Urban consumers, U.S. city avg. seasonally adjusted. Source: Bureau of Labor Statistics
2008 2009 2010 2011 2012
Bars = overall
Line = excludingfood and energy
Overall CPI was flat in June 2012.
CPI excluding food and energy was up 0.2% in June 2012.
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Year-Over-Year Change in the Consumer Price Index:Jan. 2007 - June 2012*
2007
*Urban consumers, U.S. city average. Source: Bureau of Labor Statistics
2008 2009 2010 2011 2012
Bars = overall
Line = "core" (excludesfood and energy
Overall CPI was up 1.7% and "core" CPI was up 2.2% in the year ending June 2012.
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`Rail Time Indicators – August 3, 2012 Page 38 of 39
It’s axiomatic that when the supply of something in demand goes down, the price goes up, andthe price of corn and soybeans has, in fact, risen sharply in recent weeks. That, in turn, meanshigher food prices down the line. The USDA says (see here) that “any effect on retail prices
would depend on the severity of the drought and would begin to appear on supermarket shelvesin the fall.” The USDA also notes:
“We will likely see impacts within two months for beef, pork, poultry and dairy (especiallyfluid milk). The full effects of the increase in corn prices for packaged and processedfoods (cereal, corn flour, etc.) will likely take 10-12 months to move through to retail foodprices.”
“The drought has the potential to increase retail prices for beef, pork, poultry, and dairyproducts first and foremost later this year and into 2013. But in the short term, droughtconditions may lead to herd culling in response to higher feed costs, and short termincreases in meat supply. This could decrease prices for some meat products in theshort-term. That trend would reverse after time after product supplies shrink.”
“Historically, if the farm price of corn increases 50 percent, then retail food prices as
measured by the …CPI increases by 0.5 to 1 percent. More generally, as an overallcommodity price index increases, about 14 to 15 percent of that increase is passed on toretail prices for products thatuse that commodity as aningredient.”
Food and beverages account for onlyaround 16% of the CPI, so drought-induced food price increases bythemselves wouldn’t cause the CPI toskyrocket. The chart at right showsthat over the past nine months, theincreases in the food component of theCPI have been moderate. Still, foodprices, like gasoline prices, aresomething that consumers tend to payattention to — and complain about.
Where to go for more information: The BLS press release on the June
2012 CPI is here. The July CPI will be released on Aug. 15.
-20%-18%-16%-14%-12%-10%-8%-6%-4%-2%0%2%4%6%8%
10%
Month-to-Month Change in the Consumer Price Indexfor Energy: Jan. 2007 - June 2012
2007
*Urban consumers, U.S. city avg. seasonally adjusted. Source: Bureau of Labor Statistics
2008 2009 2010 2011 2012
June 2012: -1.4%.
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
Month-to-Month Change in the Consumer Price Indexfor Food: Jan. 2007 - June 2012
2007
*Urban consumers, U.S. city avg. seasonally adjusted. Source: Bureau of Labor Statistics
2008 2009 2010 2011 2012
June 2012: +0.2%.
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
2006 2007 20092008 2010 2011 2012
*Average all grades per gallon incuding taxes. Source: EIA
Average Weekly U.S. Gasoline Price*
Week ending July 2, 2012: $3.42Week ending July 30, 2012: $3.57
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RAIL FREIGHT CARS IN STORAGE
What is it and why is it important?
A freight car is “in storage” if it has had a loaded revenue move since 2005, but not in the past 60days. Rail cars are stored when they are not needed due to lack of demand; they come out ofstorage when demand improves. Figures are for the entire North American rail freight car fleetand include rail cars owned by railroads, leasing companies, shippers, and others. The totalfreight car fleet changes from month to month as new cars are added and old cars are scrapped.
There is a great deal of complexity in freight car usage patterns. For example, increases indemand for rail service for a particular commodity relative to another mean that some car typesmight be in very short supply at the same time that others are plentiful; a freight car might gothrough cycles where it is stored for a few months and then returned to service for a few months;and changes in scrap prices might make scrapping cars more attractive at one time than another.
What are the latest numbers?
As of August 1, 2012, 314,971 freight cars were in storage, a decrease of 2,710 from July 1,2012, and equal to 20.6% of the North American fleet, excluding cars without a load sincebefore 2005 (see charts below). With the recent improvement in coal traffic, the decrease in thenumber of gondolas and open hoppers in storage was sufficient to end the 9-month streak of
increases in total cars in storage. Of the 502,853 cars that were in storage on July 1, 2009 (excluding those that last moved loaded
prior to 2005), only 41,907 remained in storage continuously through August 1, 2012. Nearly92 percent of the cars that were in storage at the peak have either carried a load since then (andperhaps subsequently returned to storage) or been scrapped.
Where to go for more information:
Contact Frank Hardesty ([email protected], 202-639-2321). Media inquiries should go to Holly
Arthur ([email protected], 202-639-2344).
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
North American Freight Cars in Storage
Data are as of the first of the month; % are cars stored as % of total fleet. Source: AAR
Mar-Dec '09 2010
20.6% of the fleet
n/a
2011 2012
31.9% of the fleet
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
Change in Number of Freight Cars in Storage
Figure for Jan. 2011 = difference in cars in storage on Feb. 1, 2011 compared to cars in storage onJan. 1, 2011; other months calculated similarly. Source: AAR
May-Dec '09 2010 2011 2012