(The following story by Ruthie Ackerman appeared at Forbes.com on June 5.)
NEW YORK — Freight traffic increased in May, in another indication that the U.S. economy, while weak in some sectors, isn’t as bad as feared.
Freight traffic rose 0.5% to 1.32 million carloads in May compared to the same month a year ago, the Association of American Railroads said. Nine of the 19 major commodity categories tracked by the AAR saw U.S. carload increases in the month.
Carloads of coal, grain, and chemicals, which include ethanol, rose in May, while motor vehicles and equipment, coke, and crushed stone, sand, and gravel decreased. “Coal, chemicals, and grain together accounted for nearly 60% of U.S. rail carloads in May, and all three showed carload increases over last year,” said AAR Senior Vice President John Gray. “It is still the case that many of the commodity categories showing rail carload declines are associated with housing and autos, sectors of the economy that remain very weak.”
The weak dollar is increasing exports of grain and coal.
The years 2006 and 2007 were the two busiest years in rail history, said Tom White, the spokesman for the AAR. If rail traffic trends continue at the current rate for the rest of 2008, said White, it would be ahead of 2007, the second busiest year on record.
Soaring fuel costs only help to make the rails more attractive. Freight that might otherwise go by truck is being sent by rail to save on fuel. With light, sweet crude for July delivery soaring $5.49 to close at $127.79 on Thursday, shares of railroad companies are booming.
Union Pacific’s shares shot up 2.6%, or $2.07, to $81.71 at the close on Thursday, while Burlington Northern Santa Fe jumped 3.1%, or $3.41, to $114.56. Norfolk Southern rose 3.0%, or $1.95, to $66.95, CSX increased 3.9%, or $2.50, to $67.17, and Genesee & Wyoming gained 4.5%, or $1.83, to $42.54.
“The prospects for growth in the railroad industry have never been better than they are right now,” said White. “On certain routes we might be nearing capacity and we’ll have to expand our capacity to be able to handle the new freight.”
Union Pacific has installed double tracking in some areas so that two trains can run simultaneously, while Norfolk Southern has increased clearances along tunnels so it can handle double-stacked trains, said White. Signaling systems are also being upgraded so trains can run faster and new freight cars have larger capacities than old cars to handle more freight.