If Shipping Is Up, What About Rail Activity?
Posted by Larry Doyle on May 13, 2009 3:26 PM |
I just reported in my prior post that the Baltic Dry Index (measuring global shipping activity) is rising and has risen close to 45% over the course of the last month. This is clearly a sign of increased economic activity and a turn in both our domestic and global economy, correct? Clearly the rise in the BDI must be correlated with a rise in rail activity here in the United States as we get our goods and commodities to port. Let’s jump on the rails and go for a ride navigating this part of our economic landscape.
Uh-oh!! It is not widely broadcast but rail activity is not only down year over year (no surprise there) but the pace of decline is quickening. The theory behind the green shoots is promoted by analysts as a slowing in the pace of economic decline. How did they miss this data? Are they not looking or not reporting?
Let’s review. The Heard on the Street column in the WSJ reports, Risk In Market’s One Track Mind.
In reviewing this piece, I was particularly struck that the pace of decline in rail activity from the 1st quarter 2009 to this point in the 2nd quarter is QUICKENING.
As the WSJ highlights:
The slump in weekly rail traffic reflects sluggish industrial activity and consumption. Shipments of industrial products are down almost a third in the past year, while raw materials like coal, metals and crops also show steep drops. The pace of decline has picked up relative to the first quarter’s 16% fall, according to Credit Suisse analyst Chris Ceraso.
In commodities, while crude oil and copper have been on a tear, prices for lumber and natural gas remain depressed. Lumber is exposed to construction and has been in a bear market since 2004, so it might be regarded as a special case. Still, there is little sign of a rebound.
The fact that rail traffic is declining at a quickening pace is inconsistent with other analysts promoting that our economy is turning. This same trend is occurring in trucking as well.
That light in the economic tunnel? It may not be daylight. Based on this report, it may not be a train either. Perhaps it is merely a reflection of overly optimistic analysts and pundits who are trying to sell you something. Ask them what they think about rail traffic.