Positive Trends in Rail Traffic Indicate Economic Growth
November's rail traffic signals a promising economic outlook as we approach 2025. The Association of American Railroads (AAR) Freight Rail Index (FRI) highlights substantial growth driven by resilient consumer spending and robust intermodal transport.
Intermodal Leads the Charge
Resilient consumer spending enabled intermodal services to lead all categories in November. The recent release of AAR's FRI indicates record intermodal results, citing robust job market conditions as key contributors. November's FRI saw a 2.8% increase over October, marking its highest point since May 2021, suggesting a stable economic foundation.
Consumer Spending Fuels Growth
The report underscores that consumer spending, which comprises 70% of GDP, has been pivotal in driving broader economic growth. Adjusted for inflation, October saw a 3% year-over-year increase in consumer spending, following a 3.1% rise in September. This growth has significantly boosted intermodal transport, with consumer spend on goods jumping 3.1% in October alone.
Job Market Resilience
Despite a slowdown from rapid growth in recent years, the job market's resilience was evident in November, showing a recovery and a strong link to consumer spending. Key indicators such as increased job openings, fewer unemployment claims, and a rise in job quitting rates suggest continued consumer spending growth.
Impressive Intermodal Figures
In November 2024, U.S. railroads originated an average of 282,000 intermodal containers and trailers per week, a 10.7% rise from November 2023 and the highest weekly average for any November since 1989. This was coupled with record container volumes, driven by heightened port activity, with a 13% year-to-date volume increase at major U.S. ports.
Challenges in Manufacturing and Coal
While intermodal transport booms, manufacturing faces sluggish growth, with carloads closely linked to manufacturing showing a 1% drop in the first 11 months of 2024. Coal continues its historical decline, down 15.2% in November and 14% year-to-date.
Optimistic Outlook with Caution
The optimism is palpable with strong intermodal growth and stable consumer demand, yet the report concludes with a note of caution. The economic outlook will depend on consumer spending resilience, labor market strength, and future commodity price trends.
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