Intermodal loadings down 0.8% in July
Intermodal volumes slowed in July. Both International and Domestic movements dropped. Seasonally adjusted performance has been flat since the beginning of the year. Good year-over-year growth is still in evidence, but it is mainly the product of growth that occurred more than six months ago. Seasonally adjusted loadings were at 1.030 million in July, down 0.8% from the prior month. Year-over-year growth remains strong but stopped accelerating in July, up 4.7%. The year ago comparisons will continue to get easier through August but then will become tougher through the end of the year.
Both International and Domestic unadjusted volume declined both on a raw and seasonally adjusted basis. International activity normally should improve from June to July as the sector begins its run-up to the seasonal peak in August, but that did not occur this year. July is usually a weaker month than June for Domestic, but this year’s month-to-month decline was greater than normal.
Intermodal Forecast Moves in the Wrong Direction: The forecast for intermodal loadings originated over the last several months has been relatively stable with only slight changes month to month. However, with the economy hitting a slump, the intermodal forecast moved lower this month. The largest impact can be seen in slower than projected growth in late 2012 and early 2013. In total, the full year 2012 is expected to see growth of a healthy 4.1% followed by more modest growth of only 3.4% in 2013. This is the slowest annual growth rate since the downturn in 2009. In the next year, 2014, demand is expected to accelerate to a pace of 4.6% growth.
General Economy Concerns Remain: Many of the concerns that were addressed last month remain. On a positive note, many of the monthly economic indicators that FTR tracks have stopped falling and have stabilized. This suggests that a noticeable deterioration in the economy over the next few months in unlikely, put not impossible. On the other side of the fence, it does suggest that stronger growth is not a high probability. As such, the risks to the forecast remain on the downside. This means that from a planning perspective, you and your company need to start having a downside scenario in your back pocket in case things deteriorate further.
International Intermodal Demand Subdued: The recent intermodal data shows that international demand continues to grow at a modest pace. However, the industry is not at growth rates that it was used to seeing prior to the great recession. Going forward, the FTR forecast for international demand was lowered starting with the fourth quarter of this year. The biggest high was seen in the first quarter of 2013. In fact, there is additional downside risk to the first half of 2013. Much of that is due to normal seasonal behavior. The FTR forecast currently has growth above it normal seasonal growth. This would suggest that there is downside pressure to the forecast given that the global economy continues to struggle.
Domestic Is A Winner: Domestic demand continues to show stronger growth than international and will do so for the next 3 years.
No slowdown here: Recent AAR weekly figures indicate that N.A. intermodal growth is running about 6% ahead of last year. However, volume remains at the same level as 10 weeks ago.
Comparison with pre-recession activity levels: 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 narrowed slightly to just under 6%. U.S. comparisons are 2.3% ahead of pre-recession levels.
Canadian rebound eases: After spiking strongly in the wake of the Canadian Pacific work stoppage, year-over-year comps are coming back to earth. Recent volume has been flat.