Waiting in traffic: Good for the economy

Posted by Brian Schmidt
on Wednesday, December 19, 2018

Driving to the office on Wednesday morning I was stopped by a northbound Canadian National train in Waukesha. Traffic was backed up in both directions, and through an intersection, for quite a while as what seemed like an endless stream of empty centerbeam flatcars rolled by. But that's a good sign, you see.

Long strings of empty centerbeams moving north to Canada means construction in the U.S. is ongoing and investment is being made. When those empty moves – and the carloads that preceded them – dry up then you'll know we're in for a bumpy ride.

You can often find early economic indicators in the Association of American Railroads' weekly and monthly rail traffic reports. The ebb and flow of U.S. business becomes apparent much sooner in weekly reports than in monthly or quarterly financial analysis from Wall Street or the government. Through the end of November, forest products are up 2.5 percent on U.S. railroads, even though there are rumblings in the news of another housing market downturn. Time will tell how that pans out, but my guess is that if lumber loads continue to grow, there's less chance of such a market turn.

There are other indicators in the rail traffic data: automotive traffic on the rails can signal confidence in consumer spending and metallic ores and metals can signal demand for industrial goods. It's really quite remarkable to see virtually all of the country's rail traffic distilled down in these reports. For the week ended Dec. 8, there were about 23,000 carloads of grain hauled on the U.S. railroads. If you saw a 120-car unit grain train then you saw about one half of one percent of the grain hauled by railroads during the week.

Next time you go out trackside, how many commodity groups will you spot?

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