AAR Realtime Indicators Report

Rail Time Indicators
A Review of Key Economic Trends

Shaping the Demand for Rail Transportation
Policy & Economics Department

Association of American Railroads
Washington, DC
October 14, 2009

Rail Time Indicators is issued monthly by the Policy & Economics Department
of the Association of American Railroads.
To get on the e-mail distribution list for Rail Time Indicators, send a request
to Beth Eagney at beagney@aar.org. If you have questions or comments
about the content of Rail Time indicators, please contact Dan Keen
(dkeen@aar.org) or Shannon Stare (sstare@aar.org).
SUMMARY FOR OCTOBER 2009
Economic Indicator Most Recent Data
U.S. Freight Rail Traffic (p. 2) ↓ 14.2% (carloads), ↓ 14.6% (intermodal) in September
2009 from September 2008.
Canadian Freight Rail Traffic (p. 3) ↓ 13.9% (carloads), ↓ 14.9% (intermodal) in September
2009 from September 2008.
Gross Domestic Product (p. 13) ↓ 0.7% in Q2 2009 (final estimate).
Purchasing Managers Index (p. 14) ↓ to 52.6 in September 2009 from 52.9 in August 2009.
Manufacturing Inventories and Sales From July 2009 to August 2009, manufacturing sales were
(p. 15) flat, inventories ↓ 0.8%, and inventory-to-sales ratio ↓ 0.5%.
Index of Industrial Production (p. 17) ↑ 0.8% in August 2009 from July 2009.
Capacity Utilization (p. 18) ↑ to 69.6% in August 2009 from 69.0% in July 2009.
Non-Farm Employment (p. 19) ↓ 263,000 in September 2009 from August 2009.
Unemployment Rate (p. 19) ↑ to 9.8% in September 2009 from 9.7% in August 2009.
Class I Railroad Employment (p. 20) ↓ to 150.064 in August 2009 from 150,400 in July 2009.
Index of Consumer Confidence (p. 20) ↓ to 53.1 in September 2009 from 54.5 in August 2009.
Retail Sales (p. 21) ↓ 1.5% in September 2009 from August 2009.
Light Vehicle Sales (p. 22) ↓ 35% on annualized basis in September 2009 from August
2009.
Housing Starts (p. 23) ↑ 1.5% in August 2009 from July 2009.
Consumer Price Index (p. 23) ↑ 0.4% in August 2009 from July 2009.
Railroad Cost Index (p. 24) From Q2 ‘09 to Q3 ‘09, wages ↑ 1.5%; wage supplements
↓ 0.1%; fuel ↑ 21.1%; materials & supplies, ↑ 2.7%.
Value of the U.S. Dollar (p. 24) ↓ 0.2% in September 2009 from August 2009.
Dow Jones Economic Sentiment ↓ to 34.1 in September 2009 from 35.5 in August 2009.
Indicator (p. 25)
Rail Freight Cars in Storage (p. 26) ↓ to 462,410 on Oct. 1, 2009 from 478,046 on Sept. 1, 2009.
Rail Time Indicators – October 14, 2009 Page 1 of 26

U.S. AND CANADIAN FREIGHT RAILROAD TRAFFIC
Who releases it and when?
• The Association of American Railroads (AAR), every Thursday morning, in the AAR’s Weekly
Railroad Traffic report.
What is it and why is it important?

• The weekly AAR data detail rail carloadings for 19 different major commodity categories, as well
as intermodal units (trailers and containers), for the previous week. Railroads that report their
data to the AAR collectively account for the vast majority of total U.S. and Canadian freight rail
traffic. Rail Time Indicators aggregates these data into monthly figures.
• Freight railroading is a “derived demand” industry — i.e., demand for rail service occurs as a
result of demand elsewhere in the economy for the products that railroads haul. Thus, freight rail
traffic is a useful economic indicator, both for the overall economy and for specific sub-sectors.
What are the latest numbers for U.S. railroads?

• U.S. freight railroads originated 1,380,684 carloads in September 2009, down 14.2% (227,837
carloads) from September 2008 and the 11th straight double-digit monthly carload decline. The
percentage decline in September was the lowest since December 2008.
• Average weekly carloads on U.S.
railroads in September 2009 (276,137) Average Weekly U.S. Rail Carloads: All Commodities
were 2,900 less than in August 2009. 360,000
All or most of that decline can probably 2006
2007
be attributed to severe flooding in the 340,000
Southeast which shut down some rail
320,000
lines for a period in September.
• In September 2009, U.S. intermodal 300,000
2008
traffic (which is not included in the
280,000
carload figures discussed above) 2009
totaled 993,235 trailers and containers, 260,000
down 14.6% (169,912 units) from
September 2008 (see charts at top of 240,000
next page). Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Data are weekly average originations for each month, exclude U.S. operations of CN and CP,
• The average weekly intermodal count and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic
on U.S. railroads in September 2009

was 198,647 trailers and containers, up % Change in Total U.S. Rail Carloads From Same
2,600 units from August 2009 and the Month Previous Year: Jan. 2006 - Sept. 2009
highest since November 2008. The 10%
last three weeks of September were the
5%
three highest-volume intermodal weeks
of 2009 for U.S. freight railroads. 0%
• For the first nine months of 2009, U.S. -5%

rail carloadings were down 18.1% -10%
(2,301,087 carloads), while intermodal
traffic was down 16.8% (1,480,358 -15%
trailers and containers). In Q3 2009, -20%
U.S. rail carloadings were down 16.0%,
compared with a decline of 22.2% in Q2 -25%
2006 2007 2008 2009
2009 and 16.2% in Q1 2009. Data are based on originations, exclude U.S. operations of CN and CP, and reflect
revisions to original reporting. Source: AAR Weekly Railroad Traffic

Average Weekly U.S. Rail Intermodal Traffic % Change in Total U.S. Rail Intermodal Traffic
260,000 From Same Month Prev. Year: Jan. 2006 - Sept. 2009
250,000 10%
2007
2006
240,000 5%
230,000
0%
220,000
-5%
210,000
-10%
200,000
2009 2008
190,000 -15%
180,000 -20%
170,000
-25%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2006 2007 2008 2009
Data are weekly average originations for each month, exclude U.S. operations of CN and CP, Data are based on originations, exclude U.S. operations of CN and CP, and reflect
and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic revisions to original reporting. Source: AAR Weekly Railroad Traffic
What are the latest numbers for Canadian railroads?

• Canadian carload traffic, which
includes the combined Canadian and Average Weekly Canadian Rail Carloads:
U.S. operations of CN and Canadian All Commodities
100,000
Pacific, fell 13.9% (54,845 carloads) in
September 2009 to 339,067 carloads, 90,000 2006
2007
while Canadian intermodal traffic fell
14.9% (38,035 units) to 217,452 trailers 80,000
and containers in September (see
70,000 2009
charts on this page for carloads and at 2008
the top of page 10 for intermodal). 60,000
• Average weekly carloads on Canadian 50,000

railroads in September 2009 (67,813
carloads) rose for the fourth straight 40,000
month to the highest level since Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Data are weekly average originations for each month, include CN and CP (including their U.S.
November 2008. operations), and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic
• Average weekly intermodal units on

Canadian railroads in September 2009 % Change in Total Canadian Rail Carloads From
(43,490 trailers and containers) were Same Month Previous Year: Jan. 2006 - Sept. 2009
also the highest since November 2008 10%
and up approximately 1,900 units 5%
from August 2009. 0%
• In the third quarter of 2009, Canadian -5%

rail carloadings were down 18.7% -10%
(203,018 carloads) compared with the -15%
third quarter of 2008; intermodal traffic -20%
was down 17.4% (122,786 units). For -25%
the first nine months of 2009, Canadian
-30%
rail carloadings were down 22.2%
-35%
(677,181 carloads), while intermodal 2006 2007 2008 2009
traffic was down 16.2% (308,217 trailers Data are based on originations, include CN and CP (including their U.S. operations), and
reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
and containers).
Where to go for more information:

• Weekly AAR press releases on railroad traffic are available on the AAR web site here.

U.S. RAIL TRAFFIC*
(5 weeks ending October 3, 2009)
Commodity Sept. 09 Sept. 08 Differ. % Chng YTD 2009 YTD 2008 Differ. % Chng
Agricultural & food products 183,371 200,730 -17,359 -8.6% 1,385,796 1,662,269 -276,473 -16.6%
Grain 102,085 112,041 -9,956 -8.9% 741,744 936,940 -195,196 -20.8%
Farm products excl. grain 4,196 4,425 -229 -5.2% 30,078 38,929 -8,851 -22.7%
Grain mill products (1) 38,626 41,721 -3,095 -7.4% 312,877 340,786 -27,909 -8.2%
Food products 38,464 42,543 -4,079 -9.6% 301,097 345,614 -44,517 -12.9%
Chemicals 162,529 162,540 -11 0.0% 1,233,526 1,433,127 -199,601 -13.9%
Chemicals 136,395 134,348 2,047 1.5% 1,022,896 1,189,892 -166,996 -14.0%
Petroleum products 26,134 28,192 -2,058 -7.3% 210,630 243,235 -32,605 -13.4%
Coal 645,843 745,131 -99,288 -13.3% 5,053,740 5,596,054 -542,314 -9.7%
Forest products 47,931 62,594 -14,663 -23.4% 374,040 513,379 -139,339 -27.1%
Primary forest products (2) 8,030 10,964 -2,934 -26.8% 59,003 85,272 -26,269 -30.8%
Lumber & wood products 11,264 15,876 -4,612 -29.1% 92,182 145,870 -53,688 -36.8%
Pulp & paper products 28,637 35,754 -7,117 -19.9% 222,855 282,237 -59,382 -21.0%
Metallic ores and metals 72,046 115,075 -43,029 -37.4% 467,734 906,934 -439,200 -48.4%
Metallic ores (3) 21,988 39,682 -17,694 -44.6% 124,458 271,662 -147,204 -54.2%
Coke 13,757 17,992 -4,235 -23.5% 106,642 147,422 -40,780 -27.7%
Primary metal products (4) 36,301 57,401 -21,100 -36.8% 236,634 487,850 -251,216 -51.5%
Motor vehicles & parts 66,438 75,965 -9,527 -12.5% 372,537 645,092 -272,555 -42.3%
Nonmetallic minerals & prod. 136,712 168,414 -31,702 -18.8% 1,033,252 1,322,619 -289,367 -21.9%
Crushed stone, gravel, sand 76,622 95,681 -19,059 -19.9% 595,644 762,349 -166,705 -21.9%
Nonmetallic minerals (5) 26,700 29,167 -2,467 -8.5% 181,126 229,856 -48,730 -21.2%
Stone, clay & glass prod. (6) 33,390 43,566 -10,176 -23.4% 256,482 330,414 -73,932 -22.4%
Other 65,814 78,072 -12,258 -15.7% 461,280 603,518 -142,238 -23.6%
Waste & scrap materials (7) 40,943 48,755 -7,812 -16.0% 269,401 402,224 -132,823 -33.0%
All other carloads 24,871 29,317 -4,446 -15.2% 191,879 201,294 -9,415 -4.7%
TOTAL ALL CARLOADS 1,380,684 1,608,521 -227,837 -14.2% 10,381,905 12,682,992 -2,301,087 -18.1%
Trailers 156,136 244,921 -88,785 -36.3% 1,230,479 1,903,643 -673,164 -35.4%

Containers 837,099 918,226 -81,127 -8.8% 6,116,820 6,924,014 -807,194 -11.7%
TOTAL ALL INTERMODAL 993,235 1,163,147 -169,912 -14.6% 7,347,299 8,827,657 -1,480,358 -16.8%
(1) - flour, animal feed, corn syrup, corn starch, soybean meal, etc. (5) - phosphate rock, rock salt, crude sulphur, clay, etc.
(2) - wood raw materials such as pulpwood and wood chips (6) - cement, ground earths or minerals, gypsum products, etc.
(3) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc. (7) - scrap metal and paper, construction debris, ashes, etc.
(4) - primarily iron & steel products; some aluminum, copper, etc.
*Data are originations. Includes BNSF, CSX, KCS, NS, UP, Birmingham Southern, Florida East Coast, Lake Superior & Ishpeming, and Paducah &
Louisville. Does not include CN's and CP's U.S. operations. Source: AAR Weekly Railroad Traffic
Average Weekly U.S. Rail Traffic: % Change in U.S. Rail Carloads + Intermodal Units
Total Carloads + Intermodal Units From Same Month Prev. Year: Jan. 2006 - Sept. 2009
625,000 10%
600,000 2006 (most traffic ever for U.S. railroads
5%
575,000
550,000 0%
525,000 2007 (second most traffic -5%

ever for U.S. railroads)
500,000
-10%
475,000
2009 2008
450,000 -15%
425,000 -20%
400,000
-25%

CANADIAN RAIL TRAFFIC*
Agricultural & food products 77,101 83,695 -6,594 -7.9% 609,939 601,211 8,728 1.5%
Grain 45,014 48,410 -3,396 -7.0% 362,210 364,313 -2,103 -0.6%
Farm products excl. grain 13,781 17,691 -3,910 -22.1% 110,049 90,334 19,715 21.8%
Grain mill products (1) 7,226 7,347 -121 -1.6% 54,616 63,766 -9,150 -14.3%
Food products 11,080 10,247 833 8.1% 83,064 82,798 266 0.3%
Chemicals 66,139 72,720 -6,581 -9.0% 479,876 609,611 -129,735 -21.3%
Chemicals 62,617 69,425 -6,808 -9.8% 455,204 583,694 -128,490 -22.0%
Petroleum products 3,522 3,295 227 6.9% 24,672 25,917 -1,245 -4.8%
Coal 38,392 41,694 -3,302 -7.9% 260,318 317,162 -56,844 -17.9%
Forest products 34,869 44,174 -9,305 -21.1% 270,049 348,474 -78,425 -22.5%
Metallic ores and metals 64,583 84,578 -19,995 -23.6% 386,134 652,921 -266,787 -40.9%
Metallic ores (3) 52,895 68,984 -16,089 -23.3% 307,781 526,079 -218,298 -41.5%
Coke 2,701 2,652 49 1.8% 15,541 16,908 -1,367 -8.1%
Nonmetallic minerals & prod. 25,896 30,084 -4,188 -13.9% 154,551 210,730 -56,179 -26.7%
Crushed stone, gravel, sand 12,806 13,324 -518 -3.9% 60,421 87,507 -27,086 -31.0%
Other 10,613 12,579 -1,966 -15.6% 78,026 101,275 -23,249 -23.0%
All other carloads 4,089 4,718 -629 -13.3% 36,406 35,616 790 2.2%
TOTAL ALL CARLOADS 339,067 393,912 -54,845 -13.9% 2,377,796 3,054,977 -677,181 -22.2%
Trailers 8,564 10,112 -1,548 -15.3% 62,681 77,973 -15,292 -19.6%

Containers 208,888 245,375 -36,487 -14.9% 1,526,133 1,819,058 -292,925 -16.1%
TOTAL ALL INTERMODAL 217,452 255,487 -38,035 -14.9% 1,588,814 1,897,031 -308,217 -16.2%
*CN and CP, including their U.S. operations. Data are originations. Source: AAR Weekly Railroad Traffic
Average Weekly Canadian Rail Traffic: % Change in Canadian Carloads + Intermodal Units
Total Carloads + Intermodal Units From Same Month Prev. Year: Jan. 2006 - Sept. 2009
140,000 10%
2007
5%
130,000
0%
120,000 -5%
2006
-10%
110,000
-15%
2008
2009
100,000 -20%
-25%
90,000
-30%
Data are weekly average originations for each month, include CN and CP (including their U.S. Data are based on originations, include CN and CP (including their U.S. operations), and reflect
operations), and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic revisions to original reporting. Source: AAR Weekly Railroad Traffic

COMBINED U.S. AND CANADIAN RAIL TRAFFIC
Agricultural & food products 260,472 284,425 -23,953 -8.4% 1,995,735 2,263,480 -267,745 -11.8%
Grain 147,099 160,451 -13,352 -8.3% 1,103,954 1,301,253 -197,299 -15.2%
Farm products excl. grain 17,977 22,116 -4,139 -18.7% 140,127 129,263 10,864 8.4%
Grain mill products (1) 45,852 49,068 -3,216 -6.6% 367,493 404,552 -37,059 -9.2%
Food products 49,544 52,790 -3,246 -6.1% 384,161 428,412 -44,251 -10.3%
Chemicals 228,668 235,260 -6,592 -2.8% 1,713,402 2,042,738 -329,336 -16.1%
Chemicals 199,012 203,773 -4,761 -2.3% 1,478,100 1,773,586 -295,486 -16.7%
Petroleum products 29,656 31,487 -1,831 -5.8% 235,302 269,152 -33,850 -12.6%
Coal 684,235 786,825 -102,590 -13.0% 5,314,058 5,913,216 -599,158 -10.1%
Forest products 82,800 106,768 -23,968 -22.4% 644,089 861,853 -217,764 -25.3%
Metallic ores and metals 136,629 199,653 -63,024 -31.6% 853,868 1,559,855 -705,987 -45.3%
Metallic ores (3) 74,883 108,666 -33,783 -31.1% 432,239 797,741 -365,502 -45.8%
Coke 16,458 20,644 -4,186 -20.3% 122,183 164,330 -42,147 -25.6%
Nonmetallic minerals & prod. 162,608 198,498 -35,890 -18.1% 1,187,803 1,533,349 -345,546 -22.5%
Crushed stone, gravel, sand 89,428 109,005 -19,577 -18.0% 656,065 849,856 -193,791 -22.8%
Other 76,427 90,651 -14,224 -15.7% 539,306 704,793 -165,487 -23.5%
All other carloads 28,960 34,035 -5,075 -14.9% 228,285 236,910 -8,625 -3.6%
TOTAL ALL CARLOADS 1,719,751 2,002,433 -282,682 -14.1% 12,759,701 15,737,969 -2,978,268 -18.9%
Trailers 164,700 255,033 -90,333 -35.4% 1,293,160 1,981,616 -688,456 -34.7%

Containers 1,045,987 1,163,601 -117,614 -10.1% 7,642,953 8,743,072 -1,100,119 -12.6%
TOTAL ALL INTERMODAL 1,210,687 1,418,634 -207,947 -14.7% 8,936,113 10,724,688 -1,788,575 -16.7%
Data are originations. Source: AAR Weekly Railroad Traffic
Average Weekly U.S. + Canadian Rail Traffic: % Change in Combined U.S. + Canadian Rail Carloads
Total Carloads + Intermodal Units + Intermodal Units From Same Month Prev. Year:
750,000 Jan. 2006 - Sept. 2009
10%
725,000 2006 2007
700,000 5%
675,000 0%
650,000 -5%
625,000
-10%
600,000
575,000 -15%
2009 2008
550,000 -20%
525,000 -25%
500,000
-30%
Data are weekly average originations for each month and reflect revisions from Data are based on originations and reflect revisions to original reporting.
original reporting. Source: AAR Weekly Railroad Traffic Source: AAR Weekly Railroad Traffic

Coal, which accounts for around half of U.S. electricity generation, is the single most important commodity
carried by U.S. railroads. In 2008, it accounted for 45% of rail tonnage, 25% of carloads, and 23% of gross revenue.
Rail coal traffic in 2009 had been holding up well until April, when it dropped sharply. Three reasons for the decline:
reduced electricity demand (for example, due to factory shut downs and mild summers in areas heavily reliant on
electricity generated from coal; lower coal exports, in part due to lower demand abroad and in part due to a higher-
valued dollar (see page 25); and lower natural gas prices, which make electricity generated by natural gas more
competitive compared to electricity generated from coal.
Average Weekly U.S. Rail Carloads of Coal % Change in U.S. Rail Carloads of Coal From Same
160,000 Month Previous Year: Jan. 2006 - Sept. 2009
15%
2008
150,000 2006 10%
5%
140,000
0%
130,000 2007
-5%
2009
-10%
120,000
-15%
110,000
-20%
Average Weekly Canadian Rail Carloads of Coal % Change in Canadian Carloads of Coal From Same
25%
10,000 20%
2007 15%
9,000 10%
5%
8,000 0%
-5%
7,000 -10%
2009 2006
-15%
6,000 -20%
2008
-25%
5,000
-30%
-35%
4,000
-40%
Combined U.S. + Canadian % Change in Combined U.S. + Canadian Rail Carloads

Average Weekly Rail Carloads of Coal of Coal From Same Month Previous Year:
165,000 Jan. 2006 - Sept. 2009
160,000 10%
2008
155,000 2006
5%
150,000
0%
145,000 2007
140,000 -5%
2009
135,000
-10%
130,000
125,000 -15%
120,000
-20%

Chemicals accounted for 9% of rail tonnage, 7% of rail carloads, and 13% of gross rail revenue in 2008.
More than half of rail chemical tonnage consists of various industrial chemicals, such as potassium chloride, sodium
carbonate (soda ash), sodium hydroxide (caustic soda), sulfuric acid, urea, anhydrous ammonia, and many others.
Plastic materials and synthetic resins — including large quantities of polyethylene, polypropylene, polyvinyl chloride,
and similar products — account for more than one-fourth of rail chemical tonnage. Most of the rest consist of various
types of fertilizers and other agricultural chemicals. U.S. carloads of chemicals in September 2009 were higher than
in September 2008, though September 2008’s chemical carloadings were sharply reduced due to Hurricane Ike.
Average Weekly U.S. Rail Carloads of Chemicals % Change in U.S. Rail Carloads of Chemicals From
33,000 Same Month Previous Year: Jan. 2006 - Sept. 2009
32,000 10%
31,000 2007
5%
30,000
29,000 0%
28,000 2006
-5%
27,000
26,000 -10%
25,000 2009 2008 -15%
24,000
23,000 -20%
22,000
-25%
Avg. Weekly Canadian Rail Carloads of Chemicals % Change in Canadian Carloads of Chemicals From
18,000 Same Month Previous Year: Jan. 2006 - Sept. 2009
20%
17,000
15%
2007
16,000 10%
15,000 5%
0%
14,000 -5%
2006
13,000 -10%
2009 2008 -15%
12,000
-20%
11,000 -25%
10,000 -30%
-35%
9,000
-40%

Average Weekly Rail Carloads of Chemicals of Chemicals From Same Month Previous Year:
50,000 Jan. 2006 - Sept. 2009
48,000 10%
2007
46,000 5%
44,000
0%
42,000
2006
40,000 -5%
38,000 -10%
2008
36,000
2009 -15%
34,000
32,000 -20%
30,000
-25%
Data are weekly average originations for each month and reflect revisions from original Data are based on originations and reflect revisions to original reporting.
reporting. Source: AAR Weekly Railroad Traffic Source: AAR Weekly Railroad Traffic

In 2008, grain accounted for 8% of rail tonnage, 5% of carloads, and 8% of revenue. Corn accounted for
51% of rail grain tonnage in 2008, followed by wheat (27%), soybeans (15%), and much smaller amounts of
sorghum, barley, oats, and other grains. The United States is the world’s top grain producer, but from year to year
U.S. grain production — and rail grain movements — can fluctuate widely in response to weather, government
policies, fertilizer use and prices, the financial condition of the farm sector, trends in markets overseas (the U.S. is the
world’s top grain exporter), and many other factors.
Average Weekly U.S. Rail Carloads of Grain % Change in U.S. Rail Carloads of Grain From Same
2007 30%
26,000
20%
24,000 2006
10%
22,000
0%
20,000
2008 -10%
18,000 2009 -20%
16,000
-30%
Average Weekly Canadian Rail Carloads of Grain % Change in Canadian Carloads of Grain From Same
30%
25%
11,000
20%
15%
10,000 2009
10%
5%
9,000
0%
2006 2008
-5%
8,000 2007
-10%
-15%
7,000
-20%

Average Weekly Rail Carloads of Grain of Grain From Same Month Previous Year:
40,000 Jan. 2006 - Sept. 2009
38,000 25%
2007 20%
36,000
15%
34,000 10%
2006
32,000 5%
0%
30,000
2008 -5%
28,000 -10%
26,000 2009 -15%
24,000 -20%
-25%
22,000
-30%

Average Weekly Canadian Rail Intermodal Traffic % Change in Total Canadian Intermodal Traffic From
55,000
Same Month Previous Year: Jan. 2006 - Sept. 2009
15%
2007
50,000 10%
5%
45,000 0%
2006
-5%
40,000
2008 -10%
2009
35,000 -15%
-20%
30,000
-25%
Average Weekly U.S. Rail Carloads: % Change in U.S. Rail Carloads Excl. Coal and Grain
All Commodities Excluding Coal and Grain From Same Month Prev. Year: Jan. 2006 - Sept. 2009
200,000 10%
190,000 2006 5%
180,000 2007
0%
170,000
-5%
160,000
150,000 -10%
140,000 2008
-15%
130,000 -20%
2009
120,000 -25%
110,000
-30%
100,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -35%
2006 2007 2008 2009
Average Weekly U.S. Rail Carloads % Change in U.S. Rail Carloads of Waste and
of Waste and Scrap Materials Scrap Materials From Same Month Previous Year:
12,000 Jan. 2006 - Sept. 2009
20%
11,000
2007
10,000 10%
9,000 0%
2006
8,000 -10%
2009
7,000 -20%
2008
6,000 -30%
5,000
-40%
4,000
-50%

Average Weekly U.S. Rail Carloads % Change in U.S. Rail Carloads of Steel and Other
of Steel and Other Primary Metal Products Primary Metal Products From Same Month Previous
16,000 Year: Jan. 2006 - Sept. 2009
20%
14,000 2006
10%
12,000 0%
10,000 2007 -10%

2008 -20%
8,000
2009 -30%
6,000 -40%
4,000 -50%
-60%
2,000
-70%
Average Weekly U.S. Rail Carloads % Change in U.S. Rail Carloads of Crushed Stone,
of Crushed Stone, Sand, and Gravel Sand, and Gravel From Same Month Previous Year:
28,000 Jan. 2006 - Sept. 2009
26,000 15%
2006 2007 10%
24,000
5%
22,000
0%
20,000
-5%
18,000
-10%
16,000
2008 -15%
14,000
2009 -20%
12,000
-25%
10,000
-30%
For some commodities, including those in the next four sets of charts, it makes most sense to combine U.S.
and Canadian carloads into a single aggregate. The U.S. and Canadian auto industries, for example, are fully
integrated. Likewise, much of the paper and lumber consumed in the United States is carried by Canadian railroads,
either in Canada or in the United States.

Average Weekly Rail Carloads of Motor Vehicles* of Motor Vehicles* From Same Month Previous Year:
35,000 Jan. 2006 - Sept. 2009
2006 10%
32,000
2007
29,000 0%
26,000 -10%
23,000 -20%
20,000 -30%
17,000 -40%
2009 2008
14,000 -50%
11,000 -60%
8,000
-70%
*Includes parts. Data are weekly average originations for each month and reflect *Includes parts. Data are based on originations and reflect revisions from original
revisions from original reporting. Source: AAR Weekly Railroad Traffic reporting. Source: AAR Weekly Railroad Traffic

Average Weekly Rail Carloads of Metallic Ores of Metallic Ores From Same Month Previous Year:
26,000 Jan. 2006 - Sept. 2009
24,000 2007 50%
22,000 2006 40%
20,000 30%
18,000 20%
10%
16,000
0%
14,000 2008
-10%
12,000 -20%
10,000 -30%
8,000 -40%
6,000 2009 -50%
4,000 -60%
-70%
2,000
-80%
Combined U.S. + Canadian Average Weekly Rail % Change in Combined U.S. + Canadian Rail Carloads
Carloads of Lumber and Primary Forest Products of Lumber and Primary Forest Products From Same
10%
16,000 5%
2006
14,000 0%
-5%
12,000 2007
-10%
10,000 -15%
-20%
8,000
-25%
2008
6,000 2009 -30%
-35%
4,000
-40%
Combined U.S. + Canadian Average Weekly % Change in Combined U.S. + Canadian Rail Carloads
Rail Carloads of Pulp and Paper Products of Pulp and Paper Products From Same Month
15,000 Previous Year: Jan. 2006 - Sept. 2009
5%
14,000 2006
0%
13,000
-5%
12,000
-10%
11,000 2007
-15%
10,000 2009
2008 -20%
9,000
-25%
8,000
-30%

GROSS DOMESTIC PRODUCT (GDP) There Is a Close Relationship Between Economic
Growth and Freight Railroad Traffic
Who releases it and when? $12 1.9
• U.S. Bureau of Economic Analysis RR Ton-Miles
Trillions of Revenue Ton-Miles

(right axis)
Real GDP (Trillions of $2000)

(BEA), measured quarterly and revised $11 1.7
as better data become available.
What is it and why is it important? $10 1.5
• GDP measures the size of the economy Real GDP

(left axis)
and how fast it’s growing. It’s the single $9 1.3
most conclusive piece of information on
the health of an economy.
$8 1.1
• On a broad level, GDP growth and 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Sources: Bureau of Economic Analysis, AAR
freight rail traffic are closely related (see
chart at right).
U.S. GDP Growth: Q1 2003 – Q2 2010
What are the latest numbers?
8%
• U.S. GDP fell 0.7% in Q2 2009 6%
compared with Q1 2009, according to Actual
final estimates released by the BEA on 4%
September 30. In the first quarter, real 2%
GDP fell 6.4%.
0%
• What the BEA said on September 30:
-2%
“The decrease in real GDP [in Q2 2009] Forecast
Estimates for Q3 2009 to Q2 2010 are the
primarily reflected negative -4%
consensus forecast by some 50 leading
contributions from private inventory -6%
economists surveyed by The Wall Street
Journal in early October 2009.
investment, nonresidential fixed
-8%
investment, residential fixed investment, 2003 2004 2005 2006 2007 2008 2009 '10
personal consumption expenditures, Q2 2009 is preliminary. Source: Bureau of Economic Analysis, Wall Street Journal
and exports that were partly offset by
positive contributions from federal
government spending and state and local government spending.” Translation: GDP fell because
higher government spending (which increases GDP) was more than offset by a number of factors
that cause GDP to decline, including consumers spending less (including on housing);
businesses investing in fewer machines, computers, and other equipment; businesses reducing
their inventories, and lower exports.
• Each month, The Wall Street Journal surveys some 50 leading economists. In the most recent
survey, released October 8, the view was that “The worst recession since the Great Depression
has left a scorched landscape that will weigh on the labor market and the broader economy for
years to come.”
• What the WSJ said: “The 48 surveyed economists expect the economy to bounce back from four
quarters of contraction with 3.1% growth in [GDP] in the just-ended third quarter. Expansion is
seen continuing through the first half of 2010, though at a slower rate.”
• The consensus of the WSJ economists in the October survey called for 3.1% GDP growth in Q3
2009, 2.5% in Q4 2009, 2.6% in Q1 2010, and 2.8% in Q2 2010.

• The most recent BEA news release on GDP, including links to detailed data tables, is here. The
BEA will release its first estimate of Q3 GDP on October 29, 2009. Click here for more on the
October Wall Street Journal economic survey.

PURCHASING MANAGERS INDEX (PMI)
• Institute for Supply Management (ISM – formerly the National Association of Purchasing
Managers), near the beginning of each month.

• The PMI is a compilation of data on new orders, inventory, production, supplier deliveries, and
employment, based on a survey of several hundred supply managers at manufacturers
throughout the United States. (Supply managers are typically in charge of purchasing/
procurement, inventory control and management, physical distribution and warehousing, and
other key functions.) The PMI is considered a key indicator both of actual “on-the-ground”
conditions as well as sentiment for what the near- to medium-term will hold.
• Manufacturing accounts for approximately 12% of U.S. GDP — not as much as it used to be, but
the United States is still the world’s top manufacturer. In fact, by itself, U.S. manufacturing would
still be around the eighth largest economy in the world.
• According to ISM, a PMI > 50 indicates that overall manufacturing is expanding; a PMI < 50
indicates that manufacturing is contracting. Also according to ISM, a PMI greater than 41.2,
over a period of time, generally indicates an expansion of the overall economy.

Purchasing Managers Index:
• The PMI fell to 52.6 in September January 2005 - September 2009
2009 from 52.9 in August 2009, marking 70
the first decrease in the PMI since 65 New Orders Component
December 2008. The “new orders” 60
component of the PMI fell to 60.8 in 55
September 2009 from 64.9 in August 50
2009. 45
• For several months, the PMI has been 40

Overall PMI
suggesting a far more optimistic outlook 35
than most other economic indicators. 30
The decline in September makes the 25
PMI less of an outlier compared to other 20
2005 2006 2007 2008 2009
indicators, but it is still an outlier.
Data are seasonally adjusted. Source: Institute for Supply Management
• What the ISM said regarding the
September data: “The manufacturing
PMI vs. the Next Month's U.S. Rail Carloadings
sector grew for the second consecutive
Excluding Coal and Grain*
month in September. ...[T]he recovery (Index Jan. 2005 = 100)
broadened as the number of industries 110
reporting growth increased from 11 to Next Month's Rail Carloads
100
13. Both new orders and production are
growing, but at a slower rate when 90 PMI
compared to August. It appears the 80
fundamentals for continuing recovery
are still at work as inventories and sales 70
correlation over entire period = 87%
are gaining balance. ...[I]f the PMI for 60
September (52.6 percent) is annualized,
50
it corresponds to a 3.6 percent increase 2005 2006 2007 2008 2009
in real GDP annually." *Jan. 2005 PMI vs. Feb. 2005 rail carloadings, etc., so rail carloads are always one
month behind. PMI is seasonally adjusted; carloads are not. Carloads exclude the U.S.
operations of CN and CP. Sources: ISM, AAR

• Since January 2005, PMI has corresponded closely with the following month’s U.S. rail
carloads excluding coal and grain1 — though that relationship has become less robust since late
2008, when PMI first fell much farther
and has now risen much more rapidly PMI New Orders vs. U.S. Rail Carloadings
than rail carloads. (See chart on Excluding Coal and Grain Two Months Later*
previous page.) That’s another reason (Index Jan. 2005=100)
to suspect that the PMI might be 120
overstating the magnitude of a 110 Rail Carloads
Two Months Later
turnaround in manufacturing and the 100
economy. 90
80
• Likewise, over the past few years, the PMI New
70
new orders component of PMI has Orders
60
been closely correlated with U.S. rail correlation = 80%
50
carloadings excluding coal and grain
40
two months in the future, but that 2005 2006 2007 2008 2009
relationship too has cooled since new *Jan. 2005 New Orders PMI vs. Mar. 2005 rail carloadings, etc., so rail carloads are
orders began surging rapidly. always two months behind. PMI is seasonally adjusted; carloads are not. Carloads
exclude the U.S. operations of CN and CP. Sources: ISM, AAR

• The press release for the September PMI is here – it includes much more detail than the
summary above. The October PMI will be released on November 2, 2009.
MANUFACTURING INVENTORIES AND SALES

• The U.S. Census Bureau, near the beginning of each month, covering the month two months
prior. (E.g., the report released in early October has data covering August.)

• The report is based on data reported from manufacturing establishments with $500 million or
more in annual shipments. Units may be divisions of diversified large companies, large
homogenous companies, or single-unit manufacturers in 89 industry categories. Figures are
adjusted for seasonal and trading-day differences but not for price changes.
• Manufacturers don’t want to hold too much inventory because it costs money to store it and it
can become obsolete or spoil. Moreover, inventory earns no return on investment. But
manufacturers don’t want too little inventory either, or they could lose sales. Like Goldilocks,
they want an inventory level that’s “just right.”
• When sales fall, inventories must rise if production is kept at the same pace. Eventually, when
inventories are too high, “de-stocking” occurs via production cuts. This leads to job losses, fewer
raw material purchases, and other negative economy-wide effects.
• Conversely, when sales rise, either inventories must fall, production must increase, or both.
Eventually, inventories becomes too low and “re-stocking” occurs via production increases. This
means more employment, more raw material purchases, and other positive economy-wide
effects.
1
Due to seasonality issues such as harvests, the role of exports, and other factors, rail carloads of coal and grain are more volatile
and less closely tied to manufacturing than other commodity categories. And since PMI focuses on manufacturing, it makes sense
to exclude coal and grain when comparing rail traffic to the PMI.

What are the latest numbers? Manufact. Sales & Inventories: Jan. 2005 - Aug. 2009
(Seasonally-Adjusted, $ Billions)
• Seasonally-adjusted manufacturing $575
sales were basically flat in August $550
2009 for the second straight month. In Manufacturing inventories
$525
fact, manufacturing sales have been $500
more or less flat for all of 2009. $475
Manufacturing sales
• Seasonally-adjusted manufacturers’ $450
inventories fell 0.8% in August 2009 $425
from July 2009, marking the 12th $400
straight monthly decrease. Inventories $375
in August 2009 were 11% below their $350
year-earlier level. $325
2005 2006 2007 2008 2009
• The inventory-to-sales ratio fell 0.5% July 2009 is preliminary. Source: U.S. Census Bureau
in August 2009 from July 2009 to 1.38.
That’s down from a peak of 1.46 in
January 2009 and March 2009. Inventory-Sales Ratio for Manufacturing:
January 2005 - August 2009
• The inventory-to-sales ratio lends itself 1.5
to a much less optimistic outlook for
U.S. manufacturing than the purchasing 1.4
The inventory-sales ratio (inventory/sales) for U.S.
manufacturing fell again in August 2009, though it
managers index does (PMI — see page must fall much further still to get to its "normal" level.
14). Given how much higher the 1.3
manufacturing inventory-to-sales ratio is
relative to its recent norms, it seems
1.2
unlikely that inventory “re-stocking” will
provide a significant boost to U.S.
1.1
manufacturing in the near term. (Some
industries will fare better or worse than
others, of course.) Things are headed 1.0
2005 2006 2007 2008 2009
in the right direction — just not terribly Data are seasonally-adjusted. Source: U.S. Census Bureau
quickly.
• Since January 2005, there has been a
The Manufacturing Inventory-Sales Ratio vs.
very close negative correlation (i.e.,
U.S. Rail Carloadings Excluding Coal and Grain*
when one goes up, the other goes (Index Jan. 2005 = 100)
down) between the inventory-sales ratio 130
for manufacturing and rail carloads 120 Mfr. Inventory-Sales Ratio
excluding coal and grain (see chart at
110
right). This inverse relationship has not
100
always been as close as it is now and
might not be as close in the future, but 90
Rail Carloads
current data continue to provide a great 80
illustration of the “derived-demand” 70
correlation = -96%
nature of freight railroading. 60
50
Where to go for more information: 2005 2006 2007 2008 J-Aug '09
• The Census Bureau’s full report on Inventory-sales ratio is seasonally adjusted; carloads are not. Data are 3-month moving averages.
Carloads exclude U.S. operations of CN and CP. Sources: Census Bureau, AAR
manufacturing sales and inventories in
August is here. Figures for September
will be released on November 3.

INDEX OF INDUSTRIAL PRODUCTION
• The U.S. Federal Reserve Board, around the middle of each month.

• Industrial production figures are based on the monthly raw volume of goods produced by U.S.
industrial firms such as factories, mines, and electric utilities. Sector breakdowns are available.
The industrial sector generally exhibits the most volatility in output during a business cycle. Large
changes in industrial output can mean that a business cycle has reached an inflection point.

• Seasonally-adjusted total industrial production rose 0.8% in August 2009 from July 2009.
Nothing earth shattering, but it is the second straight monthly increase following a revised 1.0%
increase in July 2009.
• Industrial production has fallen so much since the recession started that if industrial production
grew the same 0.8% each month going forward, it would take about 1½ years just to get back to
the level it was at in late 2007/early 2008.

• The Federal Reserve release on industrial production in August is here. September data will be
released on October 16, 2009.
U.S. Industrial Production: Total Overall U.S. Industrial Production:

January 2005 - August 2009 % Change From Previous Month
(January 2005 = 100) January 2005 - August 2009
110
2%
Resumption of operations after hurricanes.
105
1%
100 0%
95 -1%
90 July 09 to Aug 09: +1.0%
July 09 to Aug 09: +1.0% -2% Aug 08 to Aug 09: -10.7%
Aug 08 to Aug 09: -10.7%
85 -3%
80 -4%
75 -5%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Seasonally adjusted. Source: U.S. Federal Reserve Board Seasonally adjusted. Source: U.S. Federal Reserve Board
U.S. Industrial Production: Select Sectors U.S. Industrial Production: Select Sectors
January 2005 - August 2009 January 2005 - August 2009
(January 2005 = 100) (January 2005 = 100)
115 130
110 120 RR rolling stock
Manufacturing Coal mining
105 110
Chemicals
100
100
90
95
80
90
70
85 60
Paper
Iron & steel products
80 50
75 40
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Seasonally adjusted. Source: U.S. Federal Reserve Board Seasonally adjusted. Source: U.S. Federal Reserve Board

CAPACITY UTILIZATION
• The U.S. Federal Reserve Board, around the middle of each month.

• Capacity utilization attempts to capture the concept of sustainable maximum output — i.e., the
highest output a plant can maintain assuming a realistic work schedule, normal downtime, and
sufficient availability of inputs to operate the capital in place. The Fed provides capacity indexes
for 87 industries (69 in manufacturing, 16 in mining, and 2 in utilities).
• In theory, a capacity utilization rate of, say, 70% means there is room to increase production up to
100% without having to build new plants or add equipment. In practice, capacity utilization rates
(at least on an economy-wide basis) never come close to 100%. Utilization levels above 82%-
85% are generally considered "tight" and forecast price increases or supply shortages in the near
future. The farther below this level, the more slack there is in the economy.

U.S. Capacity Utilization: January 2005 - August 2009
• Capacity utilization for total 85%
industry (mining, manufacturing, and Bars = Total Industry Red Line = Manufacturing
gas and electric utilities) rose to
80%
69.6% in August 2009, up 0.6% from
the 69.0% in July 2009. This marks
the second straight monthly increase 75%
and the highest level since February
2009. 70%
• Capacity utilization in June 2009 was

the lowest ever recorded (the series 65%
began in 1967). Thus, there’s an

element of “there’s nowhere to go but 60%
2005 2006 2007 2008 2009
up” to the figures for July and August.
Source: U.S. Federal Reserve Board
• Capacity utilization for manufacturing
was 66.7% in August 2009, up from a
revised 66.2% in July 2009 and also U.S. Capacity Utilization: January 2005 - August 2009
100%
the highest since February 2009. Iron & steel products
• The capacity utilization rates of 90%
different industrial sectors vary widely. 80%

Chemicals
The chart at right shows capacity
utilization for four important industrial 70%
sectors. Note how capacity utilization 60%
Motor vehicles and parts
for iron and steel products neared or
exceeded 90% in late 2007 and early 50%
Bars = Nonmetallic minerals mining & quarrying
2008 and then fell off a cliff in late
40%
2008. It has been slowly recovering
over the past couple of months. It’s 30%
not a coincidence that the producer 2005 2006 2007 2008 2009
price index for iron and steel products Source: U.S. Federal Reserve Board
(not shown on graph) surged sharply

in early and mid-2008 and then fell sharply in late 2008.

• The Federal Reserve release on capacity utilization in August is here. September data will be
released on October 16, 2009.

NUMBER OF EMPLOYED PERSONS AND UNEMPLOYMENT RATE
• U.S. Bureau of Labor Statistics (BLS) near the beginning of each month.

• The figures provide a snapshot of the strength of the U.S. labor market and are based on surveys
of tens of thousands of households and businesses. In the United States, a gain of at least
150,000 or more jobs from one month to the next is generally considered solid job growth.
(Average monthly U.S. job growth from September 2003 through December 2007 was 159,000
jobs.) Anything less constitutes a weak job market.
• Employment is often considered a lagging indicator because employers often decide to wait until
they’re sure an economic recovery is here to stay before making new hires.
• Weak job numbers cause even the still-employed to become less confident of the future, and,
therefore, less prone to spend money (see “Consumer Confidence” and “Retail Sales” below).

• Net U.S. non-farm employment fell by Change in U.S. Non-Farm Employment*
263,000 in September 2009 from January 2005 - September 2009 (000s)
400
August 2009. The decline in
300
September was low by 2009 standards, 200
but was an increase from 216,000 net 100
jobs lost in August. 0
-100
• The U.S. unemployment rate in -200
September 2009 rose to 9.8%, up from 2005: +2.5 million jobs
-300 2006: +2.1 million jobs
9.7% in August. In the 21 months from -400 2007: +1.2 million jobs
January 2008, the U.S. economy has -500 2008: -3.1 million jobs
Jan-Sep 09: -4.1 million jobs
lost 7.2 million net jobs. -600
-700
• It is widely expected that the unem- -800
ployment rate will stay high for several 2005 2006 2007 2008 2009
*Change from previous month. Seasonally adjusted. Source: U.S. Bureau of Labor Statistics
more years. The consensus of the
panel of economists surveyed by The
Wall Street Journal in early October
2009 was that unemployment won’t fall U.S. Unemployment Rate: Jan. 2005 - Sep. 2009*
12%
below 6% — where it was for several
The official U.S. unemployment rate rose to
years prior to mid-2008 — until 2013. 11% 9.8% in September 2009 from 9.7% in Men
August 2009. The much higher
•
10%
Some jobs might not come back even in unemployment rate for men than for
women is in large part a function of huge
a strong recovery if employers decide 9%
job losses in male-dominated sectors like
that, thanks to productivity gains, they 8% construction.
can return to or even exceed previous 7%

levels of output with fewer employees
6%
than they had before.
5%
Where to go for more information: 4% Women
• The BLS press release on the 3%

2005 2006 2007 2008 2009
employment situation in September *Civilian labor force, seasonally adjusted. Source: U.S. Bureau of Labor Statistics
2009 is here. Data for October 2009
will be released on November 6, 2009.

CLASS I RAILROAD EMPLOYMENT
• Surface Transportation Board (STB), around the middle of the month.

• Report showing the average number of Class I employees at mid-month. As in other industries,
employment in the rail industry is in large part a function of the level of business — i.e., how much
freight is being hauled.
What are the latest numbers? Class I Railroad Employment: Jan. 2002 - Aug. 2009
170,000
• Class I railroad employment fell to
150,064 in August 2009, down 336 165,000
employees from July’s 150,400.
Class I employment is now more 160,000
than 18,500 employees below the
recent peak of 168,582 in November 155,000
2006. The subcategory “train and
150,000
engine” employees — consisting
mainly of engineers and conductors
145,000
that actually run the trains —
showed an increase of 353 140,000
employees in August 2009. 2002 2003 2004 2005 2006 2007 2008 2009
Data are not seasonally-adjusted. Source: STB
• The STB web site for employment data is here.
INDEX OF CONSUMER CONFIDENCE

• The Conference Board, last Tuesday of the month.

• An index based on a monthly survey of 5,000 U.S. households designed to gauge the financial
health, spending power, and confidence of the average consumer. Respondents are asked about
current conditions and their expectations for the next six months.
• The index is used mainly to predict future consumer spending, on the theory that consumers
who are confident about their job prospects, income, etc. are more likely to make purchases
(especially big-ticket purchases) than pessimistic consumers.

• On September 29, the Conference Board reported that the consumer confidence index fell in
September 2009 to 53.1, down from a revised 54.5 in August 2009.
• What the Conference Board said on September 29: “Consumer confidence, which had improved
in August, retreated slightly in September. The Present Situation Index decreased, as consumers
viewed both current business conditions and the labor market less favorably than last month.
While not as pessimistic as earlier this year, consumers remain quite apprehensive about the
short-term outlook and their incomes. With the holiday season quickly approaching, this is not
very encouraging news."

Index of Consumer Confidence: U.S. Consumer Confidence vs. Unemployment Rate
January 2005 - September 2009 January 2005 - September 2009
(Index 1985 = 100) (Index 1985 = 100)
120 140
Inverse of the U.S.
110
120 Unemployment Rate
100
90 100
80 80
70
60 Consumer Confidence
60
50 40
40
20
30 correlation over entire period = 86%
20 0
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Source: Conference Board Source: Conference Board, BLS, AAR
• There is a close correlation between consumer confidence and the unemployment rate (see chart
above right), suggesting that if predictions that unemployment will remain near 10% for the
foreseeable future hold true, it could be a while before consumer confidence recovers to where it
was in 2006 and 2007.

• The Conference Board’s press release on the consumer confidence index in September is here.
RETAIL SALES
• The U.S. Census Bureau, around the ninth business day of each month.

• Uses a monthly survey of 5,000 retailers of all types to track the dollar value of physical
merchandise sold. The data are adjusted for holiday differences and seasonal variations, but are
subject to sometimes-large revisions and are not adjusted for inflation.
• Personal consumption accounts for approximately 70% of U.S. GDP. Thus, the health of the
economy depends largely on how much “stuff” people buy.
• It often takes time for consumers to
recover from and respond to economic
Retail Sales: January 2005 - September 2009
events. Thus, an increase in spending ($ billions)
today may reflect the results of an $390
economy that began to recover a few $380 2005: +4.7%
2006: +5.1%
months earlier. A decrease in spending 2007: +3.3% Aug 09 -
$370
today may confirm an ongoing or 2008: -10.6% Sep 09:
$360 -1.5%
worsening recession.
$350
What are the latest numbers? $340
• Total retail sales fell 1.5% ($5.2 $330
billion) in September 2009 from $320

August 2009. Sales at motor vehicles $310
and parts dealers fell $6.5 billion in $300
September, more than accounting for 2005 2006 2007 2008 2009
the overall decline. Excluding motor Data are seasonally adjusted. Source: U.S. Census Bureau

vehicles and parts, retail sales in September were up 0.5%, or $1.3 billion, including a 0.9%
increase ($440 million) at general merchandise stores (e.g., department stores, warehouse
stores, supercenters).
• It’s worth highlighting again that personal consumption contributes about 70% of GDP. That’s
why continued weakness in retail sales highlights one of the major threats to economic recovery.
Without vibrant consumer spending, it will be difficult for the economy to consistently improve.
And as The Wall Street Journal recently pointed out, “Savings by suddenly frugal U.S.
households soared to an annualized $566 billion in the second quarter, more than quadruple the
rate at the start of 2008.” Money saved is money not spent.

• The Census Bureau’s press release on September retail sales is here. October retail sales will
be released November 16, 2009.
LIGHT VEHICLE SALES

• The U.S. Bureau of Economic Analysis.
U.S. Light Vehicle Sales: Jan. 2005 - Sept. 2009
What is it and why is it important? (Seasonally-Adjusted Annualized Rate in Millions)
22
• Covers U.S. sales of cars and light 20 Aug. 09 to Sep. 09: -35%
"Employee pricing" promotion Sep. 08 to Sep. 09: -26%
trucks, including pickups and SUVs. 18
Over the past 50 years, spending on 16
"Cash For Clunkers" program
motor vehicles has accounted, on 14
average, for about 3.7% of U.S. GDP. 12
10
• In 2008, 6% of U.S. Class I railroad 8
revenue came from hauling autos and 6
auto parts. 4
2
What are the latest numbers? 0
2005 2006 2007 2008 2009
• With the end of the “cash for clunkers” Data include passenger cars, SUVs, minivans, and pickups. Seasonally-adjusted. Source: BEA
program, U.S. light vehicle sales in
September 2009 plunged 35% from
August 2009 to a seasonally-adjusted
U.S. Light Vehicle Sales* vs. Combined U.S. and
annualized selling rate (SAAR) of 9.2
Canadian Rail Carloads** of Autos and Auto Parts
million — the same level it was back in (Index Jan. 2005 = 100)
April 2009. Light vehicle sales in 130
September 2009 were 26% below 120
September 2008. 110
100
• Rail carloads of motor vehicles and 90
parts are closely correlated with motor 80
70
vehicle sales. There was an uptick in
60 Auto sales
rail carloads of autos and auto parts in
50 RR carloads of autos and auto parts
September 2009, presumably in part a 40
function of inventory replenishment 30
efforts by auto dealers after cash-for- 2005 2006 2007 2008 2009
clunkers sales. *Passenger cars, SUVs, minivans, and pickups. Vehicle sales are seasonally-adjusted annualized
selling rate. **Railroad carloads are unadjusted, 3-month moving averages. Source: AAR, BEA
• BEA data on auto sales are here.

HOUSING STARTS
• Census Bureau, around the middle of each month.

• A housing start is beginning the foundation of a residential home.
• Housing directly accounts for around 5% of the overall economy and has large spillover effects on
other sectors, such as retail sales and manufacturing, since people buying new homes tend to
spend on other goods such as furniture,
lawn and garden supplies, and
appliances. U.S. Housing Starts: January 2005 - August 2009
(Seasonally-Adjusted Annualized Rate, Millions)
• Housing starts are generally considered 2.5
to be a “leading indicator” — 2.3
construction growth usually picks up at 2.0 July 09 to Aug 09: +1.5%
the beginning of a business cycle. Aug 08 to Aug 09: -27.3%
1.8
1.5
1.3
• On an annualized basis, seasonally- 1.0
adjusted housing starts in August 2009 0.8
were up 1.5% to 598,000 from July 0.5
2009. Housing starts have now shown 0.3
a very slight upward trend over the past 0.0
few months. 2005 2006 2007 2008 2009
Source: U.S. Census Bureau
• The Census Bureau’s press release on housings starts in August is here. September’s housing
starts will be released on October 20, 2009.
CONSUMER PRICE INDEX (CPI)

• U.S. Bureau of Labor Statistics (BLS), mid-month.

• The CPI is the benchmark inflation guide for the U.S. economy, measuring the changes in the
cost of a representative basket of consumer goods and services. Prices are collected in 87 urban
areas throughout the country and from about 23,000 retail and service establishments.
• The “CPI for All Urban Consumers” (CPI-U) is the inflation index most often reported by the
media, although BLS publishes hundreds of CPI indexes each month. The “core” CPI — CPI less
food and energy — is also commonly used. Food and energy prices are typically more volatile
than other prices due to their susceptibility to external shocks (e.g., oil price fluctuations).
• Among other uses, the CPI is the basis for cost-of-living adjustments for Social Security, federal
retirement payments, many private pensions, and food stamps.

• In August 2009, CPI-U was up 0.4% on a seasonally-adjusted basis compared with July 2009,
but down 1.4% on a year-over-year basis, due in part to sharply lower energy costs.
• On an unadjusted basis, CPI-U was down 1.5% in August 2009 compared with August 2008.

• What BLS said: “The 0.4 percent Consumer Price Index*: January 2005 - Aug. 2009
seasonally adjusted increase in the (Index Jan. 2005 = 100)
CPI-U was driven by a 9.1 percent rise 116
in the gasoline index. This increase 114 CPI all items
2005: +3.4% July 2009 to
accounted for almost the entire advance 112
2006: +2.5% Aug 2009:
in the energy index and over 80 percent 2007: +4.2% +0.4% (flat)
110 2008: -0.1%
of the overall increase. Despite the
August increase, the gasoline index has 108
fallen 30.0 percent over the last 12 106

CPI less energy
months..” 104 and food
102
100
• The BLS press release on the July CPI 98
is here. September’s CPI will be 2005 2006 2007 2008 2009
released on October 15. *Urban consumers, U.S. city average, seasonally adjusted. Source: Bureau of Labor
RAILROAD COST INDEXES

• The Association of American Railroads (AAR), quarterly.

• It details changes in the price level of Railroad Chargeout* Prices: Q1 2004 - Q3 2009
inputs to freight railroad operations. (Index Q1 2004 = 100)
450
400 Q3 08- Q2 09-
•
Q3 09 Q3 09
From Q3 2008 to Q3 2009, railroad 350 Wages rates 5.1% 1.5%
wage prices rose 5.1%; wage 300
Wage supplements
Fuel
3.7%
-54.6%
-0.1%
21.1%
supplements (i.e., fringe benefits) rose 250 Material & supplies 12.0% 2.7%
3.7%; fuel fell 54.6%; and the price of 200

materials and supplies in aggregate 150
rose 12.0%. From Q2 2009 to Q3 100
2009, railroad wage prices rose 1.5%; 50
wage supplements fell 0.1%; fuel rose 0
21.1%; and the price of materials and Wage Rates Wage Fuel Materials &
supplies in aggregate rose 2.7%. Supplements Supplies
*Chargeout prices and wage rates are the prices of expensed items at the time they are actually
consumed and charged to the expense accounts. Source: AAR Railroad Cost Indexes
• See the AAR web site here or contact
Clyde Crimmel at 202-639-2309 or ccrimmel@aar.org. The next quarterly release will be near
the end of December 2009.
U.S. DOLLAR EXCHANGE RATE

• The Federal Reserve Board, daily.

• An index comprised of a weighted average of the value of the U.S. dollar against the currencies
of a group of major U.S. trading partners.

• An exchange rate is the price of one currency against another. A weaker U.S. dollar
(“depreciation”) means that U.S. imports become relatively more expensive and U.S. exports
become relatively less expensive abroad. 2 All else equal, that means fewer U.S. imports and
more U.S. exports. U.S. exports of coal and grain rose substantially in 2007 and 2008, due in
part to a lower-valued dollar that made
these exports less expensive in global U.S. Dollar Exchange Rate*: Jan. 2005 - Sept. 2009
markets. (Index Jan. 2005 = 100)
104
• Conversely, a stronger dollar 102 Aug. 09 to Sept. 09: -0.2%
(“appreciation”) means U.S. imports 100 Sept. 08 to Sept. 09: +2.8%
become relatively cheaper and U.S. 98

exports become more expensive. All 96
94
else equal, that means more U.S. 92
imports and fewer U.S. exports. 90
88 ↑ = dollar is getting stronger
What are the latest numbers? 86 ↓ = dollar is getting weaker
84
• The U.S. dollar has been weakening 82
since March 2009. It fell another 0.2% 80
in September 2009 from August 2009. 2005 2006 2007 2008 2009
*Weighted average of the foreign exchange value of the U.S. dollar against the currencies of a
broad group of major U.S. trading partners. Source: Federal Reserve Board
• Information from the Federal Reserve on exchange rates is here.
DOW JONES ECONOMIC SENTIMENT INDICATOR (ESI)

• Dow Jones, on the last business day of the month.

• The ESI was unveiled on April 30, 2009, so its long-term usefulness is not yet known. According
to Dow Jones, the ESI “aims to predict the health of the U.S. economy by analyzing the coverage
of 15 major daily newspapers in the U.S. It uses a numerical scale from 0 to 100 to express the
balance of sentiment in articles about the economy. ...The ESI’s back-testing to 1990 ...suggests
the indicator can help predict economic
turning points as much as seven
months in advance of other indicators.” Dow Jones Economic Sentiment Indicator:
April 2008 - September 2009
What are the latest numbers? 50
(Maximum = 100)
• The ESI for September 2009 was 34.1, 45

down from 35.5 in August and the first
40
decline in seven months.
• According to Dow Jones, “[M]edia 35
coverage of a higher unemployment
30
rate, continued weakness in the
housing market and generally mixed 25
economic news outpaced that of limited
positive economic news for the month. 20
Apr-Dec 2008 Jan-Sept 2009
... While the ESI’s drop could be an
Source: Dow Jones
early indication of the double dip some
economists have been warning about,
2
For example, suppose a U.S. coal mine wants to export a $50 ton of coal to Germany. At $1.50 per euro, the coal costs 33 euros
($50/1.5) in Germany. If the dollar gets stronger so that one euro falls to $1.20, the cost of the coal rises to 42 euros ($50/1.2). If
the dollar gets weaker so that one euro is, say, $1.80, the coal falls to 28 euros ($50/1.8).

any sentiment data can be expected to show some random volatility. ... The [ESI] has previously
proved much less volatile than other sentiment indicators. The fall in September still leaves it
above the level for July.”

• Information on the Dow Jones ESI is here. The October ESI will be released at the end of
October.
RAIL FREIGHT CARS IN STORAGE

• The Association of American Railroads, each month in Rail Time Indicators.

• The AAR began measuring this in March 2009. (Data for previous periods are not available.) A
freight car is deemed to be “in storage” if it has not had a loaded revenue move in more than 60
days. Rail cars are stored when they are not needed; they come out of storage when they are.
Figures are for the entire North American
rail freight car fleet. Freight Cars in Storage on North American Railroads:
March 2009 - October 2009
What are the latest numbers? 550,000
• As of October 1, 2009, freight cars in

storage fell to 462,410, or 29.4% of the 500,000
North American fleet, down from 478,046

(30.4%) on September 1 and 489,469 450,000
(31.1%) on August 1. More than 15,000

cars came out of storage between 400,000
September 1 and October 1.
350,000
Where to go for more information: n/a
300,000
• Contact Frank Hardesty of the AAR’s Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09
Policy and Economics Department at Figures are as of the first of the month. Source: AAR
202-639-2321 or fhardesty@aar.org.
******************************************************
To get on the e-mail distribution list for Rail Time Indicators, send a request
to Beth Eagney at beagney@aar.org. If you have questions or comments
about the content of Rail Time indicators, contact Dan Keen
(dkeen@aar.org) or Shannon Stare (sstare@aar.org).
Previous editions of Rail Time Indicators are available on the AAR web site here.
Information in Rail Time Indicators is obtained from sources believed to be

reliable. However, the Association of American Railroads makes no
representations as to the accuracy or completeness of such information
and assumes no liability for errors or omissions.

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Rail Time Indicators

A Review of Key Economic Trends

Policy & Economics Department

October 14, 2009

SUMMARY FOR OCTOBER 2009

Economic Indicator Most Recent Data

Gross Domestic Product (p. 13) ↓ 0.7% in Q2 2009 (final estimate).

Rail Time Indicators – October 14, 2009 Page 1 of 26

What is it and why is it important?

What are the latest numbers for U.S. railroads?

on U.S. railroads in September 2009

• For the first nine months of 2009, U.S. -5%

Rail Time Indicators – October 14, 2009 Page 2 of 26

What are the latest numbers for Canadian railroads?

the top of page 10 for intermodal). 60,000

• Average weekly carloads on Canadian 50,000

• Average weekly intermodal units on

• In the third quarter of 2009, Canadian -5%

Where to go for more information:

Rail Time Indicators – October 14, 2009 Page 3 of 26

Trailers 156,136 244,921 -88,785 -36.3% 1,230,479 1,903,643 -673,164 -35.4%

525,000 2007 (second most traffic -5%

Rail Time Indicators – October 14, 2009 Page 4 of 26

Trailers 8,564 10,112 -1,548 -15.3% 62,681 77,973 -15,292 -19.6%

Rail Time Indicators – October 14, 2009 Page 5 of 26

Trailers 164,700 255,033 -90,333 -35.4% 1,293,160 1,981,616 -688,456 -34.7%

Data are originations. Source: AAR Weekly Railroad Traffic

Rail Time Indicators – October 14, 2009 Page 6 of 26

Combined U.S. + Canadian % Change in Combined U.S. + Canadian Rail Carloads

Rail Time Indicators – October 14, 2009 Page 7 of 26

Combined U.S. + Canadian % Change in Combined U.S. + Canadian Rail Carloads

Rail Time Indicators – October 14, 2009 Page 8 of 26

18,000 2009 -20%

Combined U.S. + Canadian % Change in Combined U.S. + Canadian Rail Carloads

Rail Time Indicators – October 14, 2009 Page 9 of 26

Rail Time Indicators – October 14, 2009 Page 10 of 26

10,000 2007 -10%

Combined U.S. + Canadian % Change in Combined U.S. + Canadian Rail Carloads

Rail Time Indicators – October 14, 2009 Page 11 of 26

Rail Time Indicators – October 14, 2009 Page 12 of 26

• U.S. Bureau of Economic Analysis RR Ton-Miles

Trillions of Revenue Ton-Miles

Real GDP (Trillions of $2000)

What is it and why is it important? $10 1.5

• GDP measures the size of the economy Real GDP

Where to go for more information:

Rail Time Indicators – October 14, 2009 Page 13 of 26

What is it and why is it important?

What are the latest numbers?

• For several months, the PMI has been 40

Rail Time Indicators – October 14, 2009 Page 14 of 26

Where to go for more information:

MANUFACTURING INVENTORIES AND SALES

What is it and why is it important?

Rail Time Indicators – October 14, 2009 Page 15 of 26

Rail Time Indicators – October 14, 2009 Page 16 of 26

What is it and why is it important?

What are the latest numbers?

Where to go for more information:

U.S. Industrial Production: Total Overall U.S. Industrial Production:

Rail Time Indicators – October 14, 2009 Page 17 of 26

What is it and why is it important?

What are the latest numbers?