Rail Freight Indicates Recovery in Canada Outpaces the U.S.

by: John Lounsbury

An article at TheStreet.com discusses the continuing improvement in rail freight traffic in the U.S. As mentioned in that article, Canada is doing better. While the U.S. rail freight has a long way to go to reach pre-recession levels, Canada is substantially there.

The data for rail traffic is tracked, reported weekly and summarized monthly by the Association of American Railroads. Rail freight is reported in two broad categories: (1) Carloads, comprised substantially of commodities, raw and partially processed materials and large assemblies; and (2) Intermodal traffic (containers and trailers), holding primarily smaller assemblies and finished goods and foodstuffs.

The following graph shows the total of all rail cargo traffic in the U.S. since the beginning of 2006:

The above graph can be compared to the same plot for Canada:

For both countries 2010 is following a much different path than in 2009. Last year the typical growth of traffic in the early months of the year was not experienced. In fact rail traffic declined significantly until May. In 2010 both countries have rail traffic increasing in a path parallel to the years before 2009.

Rail freight traffic is indicating that economic recovery in Canada is stronger than in the U.S. From the first graph it can be estimated that U.S. April traffic is about 50% of the pre-recessionary level. In Canada (second graph) the recovery in traffic is approximately 80%.

More details about the composition of rail traffic and discussion of the performance of some rail stocks can be found at TheStreet.com.

Disclosure: No stocks mentioned.