Total N. American rail traffic rose last week to 701k cars. Given that we expect rail traffic to fall off at the end of the year as it traditionally does, traffic readings remaining this stubbornly high gives me increasing optimism for not only Q4 but going into Q1 2013.
I’ve noted below the expected pattern based on historical readings. I omitted ’08 here because Lehman Brothers Holdings Inc. (PINK:LEHMQ), American International Group, Inc. (NYSE:AIG) etc at the end of ’08 makes any data following those events skewed. We expect the drop to be more material than it has been. This means that there continues to be underlying strength in the economy and it is growing. All fall and into winter I have been saying that rail traffic was not behaving in a fashion that would lead to the GDP growth of 1%-2% people were expecting. Today’s “surprise” reading of 3.1% is consistent with what we saw. I am expecting Q4 to turn in a strong reading also given the near flat lining of rail traffic when it should be falling.
I still expect it to fall steeply over the next two weeks as it virtually always has. But, if it doesn’t, then we need to start having discussion about just what is really happening out there because they don’t ship empty rail cars and this economy might just be coiling…..
As always, we will see what the data tells us…