Dive Brief:
- U.S. rail carloads increased 3.2% YoY in May to 1,319,420, while combined carloads and intermodal originations jumped 4.9% to 2,717,623 over the same time period, according to the Association of American Railroads (AAR).
- Containers and trailers were up 6.6% year over year at 86,010 in May, and "intermodal volume in May was the second highest for any month in history," according to AAR Senior Vice President of Policy and Economics John T. Gray.
- Total U.S. carloads for the first five months of 2018 were up 1.2% YoY while intermodal units for the first five months were up 6% YoY.
Dive Insight:
The U.S. economy is growing so fast, freight can hardly keep up. Just last week, the Institute for Supply Management (ISM) reported that businesses in non-manufacturing industries were facing slower deliveries and worsening backlogs. Demand for freight is still outpacing capacity, and rail is no exception.
The unemployment rate has fallen to record lows, and now many businesses are faced with too many job openings and not enough people to fill them. Even if railroads add more track and cars, they might not find enough people to manage them.
While the various modes of freight scramble to find ways to enlarge available capacity, economists expect the Federal Reserve to raise interest rates four times this year to rein in demand and avoid too-high inflation.
Freight rates are rising very quickly due to tight capacity, so if the Fed hikes rates on Wednesday, demand may fall and release pressure on rates, which could allow the freight industry to restore some balance between supply and demand.
