North American rail volumes continue downward trend

Some rail industry observers expect U.S. rail volumes to be flat or down in the second half of the year compared to the same period in 2018 because of factors such as U.S. trade uncertainty, a competitive truck market and some lingering shippers’ concerns about rail service. 

But signals remain mixed about the U.S. economy, which can in turn influence demand for freight transportation. Media reports on August 14 spoke of an indicator signaling a potential U.S. recession. The inverted yield curve, which happens when interest rates for U.S. Treasury short-term bonds are higher than long-term bonds, occurred briefly on the 15th, resulting in the Dow Jones Industrial Average tumbling 800 points and stoking concerns that a recession is looming.

However, trucking demand appears to be rising on the West Coast, albeit at the expense of rail intermodal. But even rail intermodal could see demand grow in certain regions in the second half of the year, Norfolk Southern (NYSE: NSC) alluded last month.

“We’ve got the most powerful Intermodal franchise in the east, which is married to the consumption part of the U.S. economy and the economy continues to move in the direction of the consumer, and the consumer-related economic indicators are still relatively strong. We’ve got a diverse merchandise franchise, which offers many opportunities for growth in the second half of the year,” NSC chief marketing officer Alan Shaw said during his company’s second quarter earnings call on July 24.

He continued, “Our intermodal franchise outlook is very consistent with what we’re hearing from our channel partners.”