Railroads Could Telegraph Rebound

Could it be that railroad shipments, considered a leading economic indicator, are sending a positive signal?

Railroad CEOs, speaking Wednesday at the JPMorgan transportation conference, said only that conditions are not getting worse. But Drew Robertson, who has compiled statistics on rail shipments for two dozen years, sees it differently.

Looking at cyclical products like crushed stone, lumber, iron ore, chemicals and coke as leading indicators among the most common railroad shipments, Robertson sees improvement.

"It's not horns and hats time yet for the economy or the railroad industry, but evidently things are coming back a little bit," he says. "It's less worse than it used to be."

For instance, chemical shipments are down from 2008, but have been better the last few weeks than they were earlier in the year. Lumber is slightly better than it was a year ago. In general, cyclical traffic has rebounded since mid-January, more than can be explained by its normal seasonal bounce.

The trends can be seen clearly at railfax.transmatch.com, a Web site maintained by Robertson, who heads New York-based transportation consulting firm Atlantic Systems. In particular, the four-week rolling average trends for baseline and cyclical traffic are up, while intermodal traffic continues to trend down. In interviews in 2007 and again in 2008, Robinson, referring to the data, noted sharp declines in U.S. industrial production.

Wick Moorman, CEO of Norfolk Southern(NSC), described January and February as "anemic" and said: "We certainly don't see any change in that in the short term, although we do not right now see any continuing deterioration year-over-year."