Posts Tagged ‘AAR’

GDP Growth’s All a Bunch of Garbage…

May 13th, 2010 Michael McDonough Comments off

I often analyze the volume of U.S. train car activity released by the Association of American Railroads, hoping to find some magical predictive power over equities, manufacturing, IP, etc…, but what I usually end up with is a mediocre coincident indicator.  While in some isolated incidents the index can exert considerable forecasting prowess, volatility and past false positives make interpreting these results extremely difficult.  Nevertheless, despite its shortcomings the data have a big advantage in that it is a weekly release, and unlike other indices cannot be impacted by speculative investors, as it tracks the actual volume of cars on track. 

The AAR breaks its data down into trains carrying various commodities, which can be an excellent tool to track developments in a specific sector.  But, for a moment I wanted to highlight a surprising correlation I found between trains carrying waste and U.S. GDP growth.  While a lot of the commodities these indices track are quite seasonal (not too much wheat to transport in the middle of winter) waste appears to track year over year GDP growth quite tightly, with a few clear exceptions in 2005.  As of 4/30/10 the volume of trains carrying waste hit its highest level since 2008, which given its relationship toward GDP is indicative of continued ‘robust’ growth for the second quarter.  Of course this series isn’t the missing link in GDP forecasting, but another mostly unpublicized index pointing toward the current strength of the U.S. economy.    

Source: AAR

Categories: GDP, US Tags: , , ,

US Railroad Activity Not a Bright Spot for Shipping Rates

September 2nd, 2009 Michael McDonough Comments off

As seaborne shipping acts as the bridge for global trade, the US’s railroad and trucking systems are the backbone of domestic bulk transport. It goes without saying that at some point the majority of goods imported to or exported from the US likely find themselves traveling on a rail car or truck before reaching their final destination. Therefore, I wanted to analyze those sectors for any potential relationship to the BDI. Step one in this process, was finding an appropriate indicator to compare railroad activity against the BDI. This step was straight forward as the Association of American Railroads (AAR) publishes a weekly report measuring railroad freight volumes by company. In the chart below I graphed the BDI against the number of cars on line for CSX on a weekly basis.


Source: AAR & Bloomberg

As you can see from the chart above the correlation between rail car volume and the BDI over the past year has been very significant., and in some cases railroad activity actually led the BDI. One possible cause for this relationship is coal. Nearly one third of US railroad volumes are coal shipments, and in 2007 36mn tons of this coal was exported. Given the relationship between the BDI and railroad volumes, diminishing railroad activity in the US is yet another factor painting a macabre picture for the shipping industry. On a year to date basis coal and grain railroad shipments are down 9.3% and 22.4%, respectively. Metal and ores, which make-up only about 3% of US railroad volumes are down over 50% year to date.

But, in order to fully grasp the implications trucking and railroads may have on shipping it is critical to understand the supply and demand factors driving the sectors along with the outlook and physical linkages between the sectors. I could open a dialogue on this immediately, but will wait until after an upcoming industry conference I am attending where I should have the opportunity to speak with the management of some major US railroad and trucking companies. Expect an update on this come mid-month.

P.S.  I apologize for not having any real-time updates today, as I am in the process of relocating offices.