Rail Group Sees US Recovery Stalling

By: John D. Boyd, The Journal of Commerce

Commentary:

The rail sector is often the harbinger among harbingers, the canary that warns the other canaries that the air is not very good. The manufacturers need to gather up all the raw materials needed to pursue their own expansion and that is the stuff that comes by rail. Then there is the accumulation of those manufactured goods by the wholesalers and some retailers and that is the rails sector again. Even the coal that is still the staple of the industry signals expansion or contraction according to the demands made on the energy sector. For most of the latter part of 2009 the rail sector was leading the way in the transportation community and there were gains in everything from coal to grain to intermodal. Now that all of this seems to be slowing the signals are equally clear. The economy is not progressing at the same pace as it has in the recent past.

The role of the rail sector as indiactor will be limited from this point however. Given that the inventory has been built now and is waiting for the consumer to start buying again the emphasis will shift in terms of transportation mode. It will be the trucking and air cargo industries that will likely see the first signs of improved demand and then rail will catch up again as the inventory build resumes to keep pace with the new demand.

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