JOC | US Carload Volume Rise Key to Intermodal Service

06.14.17 | Larry Gross, Gross Transportation

Sometimes the normal statistics used to routinely gauge progress, although technically accurate, can provide an inaccurate impression to those who do not take the time to dig a little deeper.

Such is the case with current statistics concerning an ongoing recovery in rail carload volumes. What is going on with rail carloads has big intermodal implications because if carloads are not growing it puts more pressure on the intermodal sector to deliver the goods, in terms of volume and revenue, so that railroads can make necessary infrastructure investments.

Often one of the first measures used to gauge the health of any business or market is the year-over-year comparison. There are good reasons for its popularity. Most importantly, the comparison washes out seasonal effects because we are comparing like time frames in each year. 

Based on the year-over-year measurement, the news is great and rail carloads are in growth mode. As this column was written, total North American rail carload volume (excluding intermodal) was up a whopping 9.6 percent over the most recent four-week period compared with the same four weeks in 2016.

The problem with the year-over-year measure is that it only tells us the change in volume over the past 12 months, but says nothing about when the change occurred during that 12-month time frame. This often is of little consequence because a market is growing steadily. However, sometimes it matters a great deal and this is one of those cases.

Exhibit 1, which tracks carloads per week as reported by the Association of American Railroads, reveals the problem. Carload activity is indeed running well above this time last year, producing those attractive year-over-year gains. However, the recovery occurred long ago during the second quarter of 2016. Setting aside the normal end-of-year holiday season lull, the carload trend has been flat to down since the middle of last year. Therefore, we need to dig a little deeper because these figures are raw and not adjusted for seasonality.

Just how much does carload activity vary across the seasons? Certainly, individual commodities can have a great deal of seasonal variance. For instance, grain peaks late in the year when the harvest moves. Although when you put all 20 of the reported commodities together in a bundle, the result is a diversified portfolio that does not have a lot of seasonal variation. 

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