More horrendous news from the real economy. According to the AAR intermodal rail freight was down 19.7% in the month of May and -19.2% for the week ending May 30th.
“May marked the second straight month in which U.S. rail coal carloadings had double-digit declines, a consequence of lower electricity demand and higher coal stockpiles,” said AAR Senior Vice President John T. Gray. “Industrial production is still down sharply across the board. That means lower demand for rail service for everything from chemicals and scrap metal to cement and ores. Basically, railroads are in a waiting game — waiting for the economy to turn.”
This is becoming an increasingly odd and discomforting trend. Commodities and the general economy appear to be making some progress from their lows, but this economically sensitive group continues to struggle mightily. The prices in the commodities markets and stock markets certainly conflict with the news from the rail and trucking industries. These sectors of the markets were strong and reliable leading indicators coming out of the 2002 recession and heading into the 2008 recession. I continue to believe that most of the reflation improvement we are seeing is due to strong seasonal trends and money printing as opposed to real economic strength (as evidenced in the freight data).
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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