The new edition of the “Rail Industry Overview (RIO),” which was recently published by the Washington, D.C.-based Association of American Railroads (AAR), highlighted mixed growth tracks, with intermodal volumes, driven by solid consumer spending seeing new highs for volumes, and the pairing of slow manufacturing output and low coal demand, continuing to negatively impact rail carload volumes.
This free publication is issued monthly by the AAR and provides insights from AAR’s economists, regarding what rail traffic is saying about the current state of the economy, as well as where things may be headed. It also features a Freight Rail Index (FRI), which AAR said “tracks movement across the most economically sensitive rail traffic commodities,” including U.S. carload commodities and intermodal containers and trailers.
AAR Chief Economist Rand Ghayad told LM that the RIO essentially provides a summary of the key findings from the roughly 45 reports AAR produces for various industry stakeholders, with some of those reports geared towards those in the freight rail industry, as well as policy makers, and academics, with data and information coming from what he called a wide range of sources.
“Rail volume or rail traffic data in general is usually seen as a very important and solid indicator of what’s happening in the economy,” he said. “So, if you want to know how is the economy is going to be moving over the next couple of months, one way is actually to look at what’s happening in the rail industry. The whole idea of RIO is to summarize the findings from everything we’re putting out there and connect the dots with what’s happening in the economy. If the industry is doing well, it means the economy is on the right track. If the industry is not doing well, it means there are some concerns about how the economy is proceeding. It’s meant to be very easy to digest. It’s not meant to be very technical. It’s not meant to be only for, rail folks. It’s meant to be for everybody who’s interested to know about the economy, and mostly about how rail drives the economy.”
AAR said that the November FRI hit its highest level since May 2021 and posted a 2.8% gain over October, adding that despite having some challenges, the economy remains on solid ground.
“The U.S. economy is like an orchestra; at any given time, some instruments are well-tuned and performing well., while others are out of sync or struggling to keep up,” the report noted. “The overall performance depends on how well the ensemble comes together despite individual flaws.”
Intermodal: The weekly November average for intermodal containers and trailers came in at 282,000 units, marking a 10.7% annual gain, as well as the highest November weekly average in ARR’s records going back to 1989. On a year-to-date basis through November, total intermodal volume, at 12.75 million units, is up 9.1% annually and the third highest for that period, following 2018 and 2021.
The drivers for intermodal growth in November, according to AAR, were container growth and port activity, with the former averaging 272,243 per week in November, its third highest weekly tally for any month in AAR’s records, despite Thanksgiving typically being one of the lowest-volume weeks of the year. What’s more, AAR said that the nine highest intermodal weeks on record for U.S. railroads have occurred since August, with three of the top five, including the top two weeks, coming in November.
As for port activity, AAR observed that container growth is also benefitting from higher volumes at ten major U.S. ports tracked by AAR, with West Coast ports up 18% annually through September and East Coast ports up 9% annually for the same period.
“Part of the growth at West Coast ports is diversion of freight from the East Coast in anticipation of past (and potential future) labor unrest there,” said AAR. “Additionally, some imports are being brought forward in anticipation of potential tariff increases under the new administration.”
Carloads: November U.S. carloads fell 3.8% annually and down in 10 of 11 months year-to-date, with year-to-date volume down 3.1% annually, or 335,964 carloads, to 10.5 million carloads, with AAR saying there have been only lower tallies for that period only once, in 2020, going back to 1988.
This was driven by coal carloads being down 15.2% annually in November and down 14.0% year-to-date through November, according to AAR, with higher coal exports not being enough to offset lower levels of domestic coal demand. When removing coal, AAR said that U.S. carloads posted a 1.0% annual increase in November, up for 10 consecutive months, and also up 1.4% year-to-date, and at its highest level, for that period, going back top 2019.
Conversely, leading the way were gain carloads, up 8.8%, or 787,881 carloads, annually, and chemical carloads rose 3.9% annually, its 15th consecutive month of annual gains.
“The bottom line is that rail traffic in November, while by no means stellar, suggests that the broader economy remains on stable footing,” wrote AAR. “As the U.S. enters 2025 under a new administration, the outlook hinges on several key factors: the resilience of consumer spending, the labor market’s strength, and the trajectory of inflation and interest rates. The combination of strong intermodal growth and stable consumer demand offers reasons for optimism, but railroads and the economy alike must navigate evolving policies and potential disruptions. Vigilance on these economic indicators will be critical in assessing the trajectory of rail traffic and broader economic health in the months ahead.”
In a previous interview, AAR’s Ghayad told LM that over the remaining weeks of 2024, it is unlikely to see any major big spikes or downturns that could impact current volume levels, with similar values in terms of the averages AAR has seen over the last few months.
“In general, the growth trend will likely continue at the same pace that we’ve seen over the last few months,” he said. “Nothing major is likely going to happen, and we remain cautiously optimistic. We say cautiously because, there is a new administration coming. We’re not sure yet what the kind of policies that are going to be put in place and what kind of impact that will have on trade and other sectors. We’ll continue to monitor this very closely, but we remain optimistic.”
What’s more, he added that something AAR has been very focused on recently is, how it actually measures volumes and growth, in terms of only looking at carloads, ton miles, or train miles. Which he said can yield difference results, with carloads showing a positive trend and train miles showing a negative trend. To that end, he said AAR is working on developing a broad, comprehensive measure that takes all these data points into consideration, in addition to many other things, including how much the railroads are investing, or capital expenditures.
