Trucking Data and Rail Data are Diverging
Rail traffic continues to show 2010 activity intermediate between 2008 and 2009 for carload traffic while intermodal traffic showed continued improvement to less than 10% below the pre-recession years of 2006 and 2007. Carload traffic is largely raw materials and intermediate goods; intermodal traffic is comprised of containers and trailers containing finished goods. The implication is that current retail business is strengthening but future economic activity, as reflected by raw materials and commodities is lagging. The monthly summary data is reported by the AAR (American Association of Railroads). That report was summarized on Monday by Steven Hansen. His conclusion was that rail traffic data did not reflect a slow growth or zero growth economy.
The Ceridian UCLA Pulse of Commerce Index for September tells a somewhat different story than does the rail traffic data. This index which measures economic activity reflected by the use of diesel fuel has reported slowing economic activity growth for the past four months ending with September. This data has been diverging from the rail traffic data. All eyes are watching to see if this divergence will continue in the coming months.
Here are two graphics from the AAR report:
The slowing of growth in the Ceridian-UCLA Index can be seen in the following graph:
From the September Index Report:
Last month, with two of the three months of the quarter recorded, we reported that …"the PCI is currently consistent with a GDP growth number for the current quarter in the disappointing range of 1.5-2.5%, which approximates well the current consensus view of the economy." Now that the full quarter of PCI data is available, our PCI-based GDP forecast for growth in the 3rd quarter of 2010 has sunk to an anemic range 0.7% to 1.7%.
However, the September report does not indicate the analysis predicts a dip back into recession is imminent.
The amount of goods being moved is an important indicator of economic activity and EconIntersect will follow developments here closely as we continue our recession watch. Steven Hansen has discussed how EconIntersect uses the Ceridian data.
The rail freight data is consistent with a moderate growth scenario, while the diesel fuel based data is pointing toward slower growth. One of these readings of the economy must be wrong. The question is: Which one?