Intermodal loads gain in December

Intermodal volumes leapt upwards in December following three months of modest growth. Seasonally adjusted loadings were at 1.051 million in December, a gain of 5.0% from November. The year-over-year growth also accelerated, up 6.9% – its best showing since April 2011. The trailing shoulder of the peak season continues to be unusually strong. Despite that, the outlook for 2012 and beyond was relatively unaffected.

International container movements led the way with a strong month-over-month improvement. International volume improved year-over-year for the second straight month, while Domestic notched strong gains.

Data from the Association of American Railroads (AAR) indicate some slowing occurring in early 2012. There are often wild gyrations at the end of the year as holiday timing is critical. General indications are that the very high comparisons of recent weeks will not be sustained.

Outlook
Intermodal loadings are forecast to continue a string of record-setting levels in 2012, especially in the domestic movements. It will continue growing over the next two years at a similar rate. After dropping 14.3% in 2009, volumes rebounded strongly in 2010 and surged 14.1%. The pace of growth slowed during 2011 but remained above trucking, rising 5.6%. We expect the growth rate to remain near this mark for the next several years, growing 5.9% in 2012 and 4.5% in 2013. We are introducing our 2014 outlook with further growth of 5.0%.

The growth rate remains above that of trucking, but the recent improvement of the truck outlook has narrowed the gap between the two modes.

Analysis
How indicative is the strong December performance? The strength in December was real. Intermodal’s strong December performance, when coupled to the also strong truck loadings that were reported indicate that the economy has quite a bit of momentum going into 2012. Nevertheless, we should be aware of several factors that should inspire some caution. For one, cautious retailers went into the peak shopping season with very lean inventories that provided little room for any upside surprises. With the holiday season being reasonably strong in aggregate, we are probably seeing some restocking in December that will continue into January, but not indefinitely. Also, keep in mind that the Chinese New Year fell very early in 2012, which would also have the effect of pushing intermodal activity, International volume in particular, into December and early January.

AAR weekly data provides the most timely information on recent intermodal activity. Data is issued on Thursday of each week covering the prior week’s movements.

AAR figures indicate a slow-down in January. Volume has declined from the strong levels seen at the end of the year. The Chinese New Year shutdown will hurt volumes in the latter part of January. But decent growth is still underway.

Comparing the current 4-week moving average volume with the average for the same period for the years 2006 through 2008, North American comparisons have retreated in recent weeks after a brief excursion into record territory at the end of the year.

NOTE:
Intermodal is rail intermodal units originated, seasonally adjusted. It contains International and Domestic containers as well as Trailers shipped via rail. The transfer of a container or trailer to another railroad for the purpose of terminating the shipment or passing it to another railroad is only counted as one loading. Intermodal is defined as a movement of a container or trailer via more than one mode of transportation (i.e. rail and truck).