Rail Traffic Increase Builds Hopes for Holiday Season

The American Association of Railroads (AAR) weekly report on rail traffic showed total traffic up 2.7% last week, even though non-container carload traffic was down 0.2%.

The largest increase came in carloads of petroleum and petroleum products, up 16.8% compared with the same week a year ago, to 12,726. Non-metallic minerals and products shipments were up 13.4% for the week, while grain shipments fell by 11.4%.

So far this year, petroleum carloads are up 42.8% and grain shipments are down 15.9%.

Container shipments often are used as a proxy for the demand for consumer goods because goods like electronic gear and clothing make up about 72% of all container shipments. Increases in container shipping in August and September are typically signs that retailers expect sales to be higher during the coming holiday season.

The odd thing, though, is that recent quarterly earnings reports from retailers like Wal-Mart Stores Inc. (NYSE: WMT), Macy’s Inc. (NYSE: M) and Kohl’s Corp. (NYSE: KSS) have included lowered estimates for sales in the second half of the year. The retailers have been citing cautious spending by consumers as the reason for weak results in the second quarter, and the stores are expecting more of the same for the rest of the year.

But the holiday shopping season can surprise to the upside when consumers who are fed up with watching every nickel they spend suddenly open their wallets. Retailers had better hope that is what’s in store for this year.