Union Pacific’s CFO, Robert Knight, was on CNBC earlier yesterday to discuss the state of the economy. As North America’s largest railroad company with businesses diversified across much of American industry, they’re uniquely positioned to gauge the health of the US economy. What is Knight saying? It depends on where you look. Specifically, he said:
“We’ve got a little bit of a mixed bag going on right now. Year to date our volumes overall are up 3%. Now, the 3rd quarter year over year volumes have softened a little bit and are essentially flat versus last year, but when you look underneath the surface at each of the markets – some of our markets are continuing to be very strong like chemicals, industrial products, energy, moving coal, autos are actually up. The business that’s softest for us is where we’re feeling the most economic impact is that business which is most retail and economically sensitive and that’s our intermodal business. Our international intermodal business is actually down year over year.”
He goes on to say that businesses are generally cautious here, but that the economy is still slowly growing. He adds that the primary driver of his hiring plans is growth (surprise, surprise, businesses hire when there is demand for their goods and services!).
I think this overall outlook is consistent with the general rail data we’ve been seeing of late and the muddle through that I expect to continue. The US economy is not collapsing, but it’s also struggling under the burden of weak consumer driven demand. The full interview is attached: