Intermodal rail freight began to increase over the last few weeks which has led to some upbeat comments and optimism about the recovery. While the data is heading in the right direction I think the punditry is getting a bit ahead of itself on this subject.
The Association of American Railroads (AAR) publishes a weekly news release that includes data about rail freight. The data is divided into two categories: intermodal and carloads. Intermodal includes the containers that you see in shipping ports. Carloads is bulk stuff, which the AAR further breaks down into Grain, Farm Products ex Grain, Metallic Ores, Coal, Crushed Stone Sand & Gravel, Nonmetallic Minerals, Grain Mill Products, Food & Kindred Products, Primary Forest Products, Lumber & Wood Products, Pulp Paper & Allied Products, Chemicals, Petroleum Products, Stone Clay & Glass Products, Coke, Metals & Products, Motor Vehicles & Equipment, and Waste & Scrap Materials.
It follows from what we know about intermodal freight that there should be some sort of correlation between container activity at our ports and intermodal rail freight, i.e. containers coming and going from ports have to be transported. I don't have data on container movements by road, but below is a chart showing intermodal rail freight and total container movement at the ports of Los Angeles and Long Beach. In order to identify trends and remove seasonality, the data shown is a 52-point moving average of the weekly intermodal freight data and a 12-point moving average of the monthly port data. (Click to enlarge)
We see that the trends in both sets of data agree fairly well, and also that both data indicate a bottoming late in 2009. This is good news in so far as it indicates a recovery, but is well short of the sort of data you'd expect to support some of the more exuberant comments being made about the economy. For a more sobering set of data we have a look at the carloads in the next chart, again a 52-point moving average of the weekly data.
Again this shows a bottoming occurred late in 2009 but as yet there is nothing to get excited about. Of course if this data doesn't fit your narrative you can always choose to focus only year-on-year or other types of differences.
When we take annual differences, something done in so much of the data that is being presented at the moment, we see that an ordinary set of data can be turned into something upbeat. According to the YOY data in this chart we have been experiencing a "V" shaped recovery since about May 2009.
Disclosure: No positions