The first word in the Association of American Railroads' annual railroad industry outlook is "uncertainty," as a host of economic and policy issues will weigh on the industry in 2025.
The report said uncertainty was more pronounced amid cyclical factors and expectations for policy changes in the coming year, further dampening optimism.
"As we enter 2025, potential changes in fiscal policy, trade, immigration, tax and regulatory frameworks, as well as the changing Federal Reserve 's monetary policy is exacerbating economic uncertainty," and economics, in the report. “The interplay between these policies will be critical in determining whether the labor market remains resilient enough to sustain consumer spending and support continued growth in rail intermodal transport, as seen in 2024.
"Similarly, manufacturing has experienced two years of persistent weakness that has severely impacted rolling stock volumes, and its trajectory will depend on how broader economic conditions respond to fiscal and monetary measures in the coming months."
The report doesn't make it clear that much of this uncertainty is caused by business expectations for a second Trump administration.
The rail segment delivered strong results in 2024. Intermodal volumes hit their third-highest level on record, but continued strong consumer spending and penetrating port activity led to record passenger traffic in December.
Declines in coal shipments continued to weigh on freight volumes. However, excluding coal, freight volumes in December were slightly higher than in the same month in 2023, and this continued for 11 consecutive months in 2024, the first time this has happened since 2018, with chemicals and grains Freight volume leads.
The AAR Freight Rail Index (FRI), which measures seasonally adjusted intermodal traffic plus vehicle loads excluding coal and grain, rose 2.2% month-over-month to reach its highest level since January 2021.
"This continued upward trend suggests that the overall U.S. economy remains on relatively solid footing as 2025 begins, despite continued weakness in manufacturing and policy-related uncertainty," Gayard wrote.
Consumer spending, a "key underpinning" for intermodal transport, remained "robust" amid an equally solid labor market.
Adjusted for inflation, spending rose 2.9% from November 2023, while spending on goods rose 3.4%, the largest increase in a year, after rising 3% in September and October.
In 2024, container freight volume accounted for 96.3% of U.S. intermodal origins, reaching a record high, while port throughput also experienced double-digit growth, especially on the West Coast.
Consumer spending will create an average of 186,000 new jobs per month in 2024, the report said, down from an economically unsustainable 251,000 jobs in 2023 but on par with the 183,000 monthly average from 2010 to 2019. Average inflation-adjusted earnings rose year-over-year for 20 consecutive months through December 2024, after falling for 25 consecutive months.
In December 2024, the unemployment rate fell to 4.1%, similar to the level of the past six months.
The report noted some labor pushback. The share of workers who voluntarily quit their jobs for better opportunities fell to 1.9% in November from 2.1% in October, reaching the lowest level since May 2020. Jobless claims rose slightly in early December, while job seekers are taking longer to find work than they did a year or two ago.
Even so, "the labor market continues to beat expectations, raising optimism that consumer spending and rail intermodal activity will continue to be supported," Gayard wrote. "A sudden and self-reinforcing downturn in the labor market, lower confidence prompting consumers and businesses to save more for uncertain times, and rising inflation that could erode purchasing power are all potential obstacles to continued growth in spending."
Year-over-year declines in key inflation measures such as the consumer price index and the Fed's favored personal consumption expenditures index have slowed through the end of 2024, indicating that inflation risks remain. But it was enough to spur rate cuts in September, November and December as the Fed sought to stabilize the job market and find a "neutral" interest rate suitable for sustainable growth, moderate inflation and low unemployment.
"In effect, the current policy environment has brought the economy, as well as industries such as railroads, to a standstill," Gayard wrote. "While the Fed's interest rate cuts have brought some relief, uncertainty remains high. There are concerns surrounding future inflation trends, interest rate adjustments and the broader economic outlook will continue to influence business conditions in the coming months."
The decline in U.S. manufacturing over the past two years has put pressure on truckload shipments, and although business confidence is high through 2025, uncertainty remains.
In 2024, coal transportation volume dropped 13.6% year-on-year to 2.94 million vehicles, a record low, but still accounted for more than a quarter of the total transportation volume. Excluding coal, U.S. freight volumes rose 1.9% in December, the 11th consecutive year-over-year increase, and were up 1.5% in the fourth quarter and 1.4% for the full year.
Of the 20 cargo categories tracked by AAR, 12 are higher in 2024 than in 2023. Increased exports helped cereals lead the way, with 1.07 million truckloads, an increase of 8.5%, although this was the smallest number of loads since 2019.
Chemical shipments totaled 1.69 million vehicles in 2024, a record high and up 4.1% year-over-year, with increases every month since September 2023, in part due to higher natural gas prices for producers that use natural gas as feedstock or energy. Low.
Loadings of petroleum products will reach their highest levels since 2019 in 2024 due to increased crude oil shipments, while a manufacturing slowdown has pushed steel products to their lowest levels since 2020, the report said.
Motor vehicles will grow by 1.2% year-on-year in 2024, but fell in November and December.
"The latest survey from the National Association of Manufacturers and the Business Roundtable shows an increase in business confidence in the fourth quarter of 2024 and expectations for 2025," Gayard wrote. "How 2025 will play out is unclear, but rail The company is ready to help its customers and the economy continue to grow."
Find more articles by Stuart Chirls here.
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