November rail traffic is signaling a positive outlook for the broader economy heading into 2025.
Resilient consumer spending helped intermodal continue to lead all categories in November and year to date, according to the Association of American Railroads’ Freight Rail Index (FRI) released Monday.
Continued strong consumer demand and port activity fueled record intermodal results in November, for three of the top five weeks since AAR started collecting data in 1988. The trade group credited a robust job market for bolstering growing consumer activity.
The November FRI was up 2.8% over October, reaching its highest point since May 2021. “This suggests that, while the economy has its challenges, it remains generally on solid ground,” the AAR said in the report.
At the same time, carload activity reflected ongoing weakness in the manufacturing sector and a steady decline in coal consumption.
The FRI counts intermodal plus carloads excluding coal and grain, and is considered an indicator of overall economic conditions. It is also seasonally adjusted by the AAR, in line with other indicators.
The AAR said consumer spending on goods and services, which accounts for 70% of GDP, is setting the pace for the broader economy with an inflation-adjusted 3% gain in October, the most recent available data, from a year ago following a 3.1% improvement in September.
More germane to rail, inflation-adjusted consumer spending on goods increased 3.1% in October y/y, which the AAR credited for the yearlong boost to intermodal results.
The report noted that while job growth has slowed from “unsustainable levels” in the past several years, a November recovery showed the jobs market remains resilient and, for obvious reasons, goes hand in hand with consumer spending.
More job openings in October from September; the fewest unemployment claims in November since April; a five-month high in the October quit rate (workers who quit their jobs presumably for better ones); and stable inflation portend continued consumer spending gains.
Those factors, and the results of the presidential election, pushed consumer confidence in November to its highest level in 16 months, according to the Conference Board, further bolstering the positive economic outlook.
In the U.S., railroads originated an average of 282,000 intermodal containers and trailers per week in November 2024, up 10.7% over November 2023 and the highest weekly average for any November dating to 1989. Year-to-date intermodal volume in 2024 through November was 12.75 million units, up 9.1% y/y, the third most behind 2018 and 2021.
Container originations averaged 272,243 per week in November, the third-highest weekly average on record.
The all-time top nine container weeks for U.S. railroads have come since late August of this year, AAR said, with three of the top five, including the top two, in November. Year-to-date container volume through November was the most ever, up 10.6% y/y. Trailer originations were off 19.7% from 2023.
The record container volumes follow higher port activity, with aggregate year-to-date volume at 10 major U.S. ports tracked by AAR ahead 13% through September from the previous year. West Coast gateways improved by 18%; East Coast ports increased 9%. The report noted some growth at West Coast ports came on the diversion of shipments from the East Coast ahead of a strike by members of the International Longshoremen’s Association. Some imports were also being brought forward in anticipation of potential tariff increases under the incoming Trump administration, and another possible East Coast port strike in January.
There was less good news in the manufacturing sector, which continued sluggish results seen over the past several years.
Carloads closely correlate broader manufacturing output, and shipments of chemicals, paper, steel and other metal products, motor vehicles, crushed stone and sand, metallic ores, and stone and mineral products were down 1% in the first 11 months of 2024 from a year ago.
Total carloads in November fell 3.8% y/y and were off in 10 of the 11 months of 2024. Volumes through November decreased 10.5 million, or 3.1%, to 335,954 carloads from the previous year. Only the pandemic year of 2020 had lower year-to-date total carloads since 1988.
Coal continued its historical decline, down 15.2% in November and 14% year to date to 2.71 million carloads — lowest on AAR record — as higher exports failed to offset lower domestic demand. But that figure was still 25.9% of all carloads, ahead of chemicals, 14.8%, and grain, 9.4%.
Excluding coal, carloads rose 1% in November, the 10th straight month of y/y improvement, and gained 1.4% year to date, the most since 2019.
Grain averaged 22,332 weekly carloads in November, up 0.7% from November 2023 and the 10th straight year-over-year increase. Volume came on easy comparisons to 2023, when grain exports were unusually low.
Grain carloads through November were up 8.8% year to date, or 78,881 carloads, leading all other commodity categories, but turned in the lowest volume in absolute terms since 2015 because grain exports are still lower than other, recent years.
Carloads of chemicals averaged 32,288 per week in November 2024, the highest weekly average ever for that month, ahead 3.9% over November 2023 amid year-over-year gains for 15 straight months. Year-to-date carloads through November totaled 1.55 million, an increase of 4%, or 60,155 carloads, and a record for the first 11 months of a year. Chemical production has been fueled by low prices for natural gas, and the outlook foresees steady expansion in 2025, the report said, quoting the American Chemistry Council.
The report concluded by noting that the economic outlook depends on the resilience of consumer spending, strength of the labor market, and where inflation and interest rates are headed. The combination of strong intermodal growth and stable consumer demand “offers reasons for optimism,” but railroads and the economy have to be vigilant in navigating evolving policies and potential disruptions.
Find more articles by Stuart Chirls here.
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