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Steven Hansen
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Steven Hansen is an international business and industrial consultant specializing in turning around troubled business units; consults to governments to optimize process flows; and provides economic indicator analysis based on unadjusted data and process limitations.
My company:
Econintersect LLC
My blog:
Global Economic Intersect
  • Economic Softness Showing In An Indicator 2 comments
    Jan 18, 2014 1:11 AM

    I believe the economy will strengthen in 2014, but I continue to look for indications my view is not correct. This week a data point left me uneasy.

    Rail

    Week 2 of 2014 shows same week total rail traffic (from same week one year ago) showed significantly decreased rail traffic according to data released by the Association of American Railroads (AAR). The extent of this week's decrease was so significant that it is decelerating the growth in the rolling averages.

    • Four week rolling average rate of growth is decelerating, and compared to the rolling average one year ago is also decelerating;
    • 13 week rolling average rate of growth is decelerating, and compared to the rolling average one year ago is also decelerating;
    • 52 week rolling average rate of growth is decelerating, and compared to the rolling average one year ago is also decelerating.

    Note that although there is deceleration in the averages, they all indicate growth over the same period one year ago. A summary of the data from the AAR:

    The Association of American Railroads (AAR) today reported decreased U.S. rail traffic for the week ending Jan. 11, 2014 with 256,849 total U.S. carloads, down 8.2 percent compared with the same week last year. Total U.S. weekly intermodal volume was 235,987 units down 6.7 percent compared with the same week last year. Total combined U.S. weekly rail traffic was 492,836 carloads and intermodal units, down 7.5 percent compared with the same week last year.

    Two of the 10 carload commodity groups posted increases compared with the same week in 2013, including grain with 20,367 carloads, up 10.1 percent. Commodities showing a decrease compared with the same week last year included motor vehicles and parts with 11,051 carloads, down 22.5 percent; metallic ores and metals with 20,143 carloads, down 20.3 percent; and, nonmetallic minerals and products with 25,177 carloads, down 16.0 percent.

    For the first two weeks of 2014, U.S. railroads reported cumulative volume of 503,695 carloads, down 3.4 percent from the same point last year, and 422,865 intermodal units, down 1.9 percent from last year. Total combined U.S. traffic for the first two weeks of 2014 was 926,560 carloads and intermodal units, down 2.8 percent from last year.

    USA coal production is down 5.6% same week year-over-year - and coal accounts for almost half of carloads. The data would worse ignoring coal and grain.

    This WeekCarloadsIntermodalTotal
    This week Year-over-Year-8.2%-6.7%-7.5%
    Ignoring coal and grain-10.4%  
    Year Cumulative to Date-3.4%-1.9%-2.8%

    [click on graph below to enlarge]

    Current Rail Chart

    (click to enlarge)

    What does this mean? Cannot say yet, but rail movements are 2 to 3 months ahead of consumer spending. This could just be a blip on the screen - but it bears watching.

    Other Economic News this Week:

    The Econintersect economic forecast for January 2013 predicted a slowing economic growth after several months of increasing growth. What this forecast cannot see is the effect of Obamacare - but slowing of growth in this forecast was primarily the result of the business sector.

    The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

    Current ECRI WLI Growth Index

    (click to enlarge)

    Initial unemployment claims went from 330,000 (reported last week) to 326,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate. The real gauge - the 4 week moving average - improved from 349,000 (reported last week) to 335,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line)

    (click to enlarge)

    Bankruptcies this Week: none

    For a complete list of analysis and opinion this week - [click here]

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: economy, rail
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Comments (2)
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  • Thanks again Steve. The numbers regarding the decrease in rail traffic is interesting, and an area that not many people analyze - at least here on SA. Agree it may be a leading indicator of things to come. Still keeping an eye on the 4 week IUC Avg, but I have a feeling the downward slope is temporary and will be turning higher.
    18 Jan, 09:17 AM Reply Like
  • Steve - CSX in this weeks conference call mentioned "challenging weather conditions" late in the year and in early 2013 having a negative impact. And with the exception of coal, were quite positive about volumes for the coming year.

     

    This other quote was part of the Q&A:

     

    Michael Ward, CEO: "I would describe it as this: The first two weeks were essentially, from a freight standpoint, a non-event due to the weather impact that occurred as you’re aware. We had severe weather across the north end of our railroad. A lot of freight was backed up."

     

    "My view is that by the end of the quarter we will have recovered any of that revenue and freight that we would have lost. In fact, just this week, when we report our numbers for the week, you’ll find that our volumes have picked up significantly. So on the first part of your question, I feel very positive as we move into the first part of this year."

     

    If he's correct, next weeks numbers should improve.
    18 Jan, 12:28 PM Reply Like
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