Tuesday, August 16, 2011

Transportation Stocks & Railcar Loadings

The plunge in the S&P 500 Transportation stock price index has been extraordinary and reminiscent of the plunge following the collapse of Lehman during September 2008. This year, the index peaked at a record high of 361.72 on July 7 and dropped 19.5% by the close on Monday, August 8. It has rebounded 6.9% since then, but remains 13.9% below its recent record high. This index was a leading indicator for the sharp decline in railcar loadings that started at the end of 2008 and continued through mid-2009. That’s possible again, however not very likely unless the economy is about to fall into a recession.
Instead of a recession, the latest 26-week moving average of railcar loadings confirms that the economy may actually be coming out of its soft patch following the disruption in production as a result of the Japanese parts shortage problem during the spring. This measure of economic activity has rebounded back to the best reading since the week of December 18, well before Japan’s earthquake hit.

The recent rebound in railcar loadings has been led by intermodal container loadings, which is approaching the record high at the end of 2010. These loadings tend to carry lots of imported goods from the ports to distribution centers. This suggests that retailers are expecting that consumers will be in a buying mood during the holiday season.

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