Is the economy really getting better? Railroad traffic says no
With all the good news coming out of beautiful Jackson Hole, Wyoming, where many of the world's leading central bankers are enjoying themselves this week, you would think that happy days are here again. Sure, Ben Bernanke is trying to get re-appointed and to do that he is giving speeches about how the economy is on the verge of growing again, thanks to the Fed's money tsunami. But how would he explain the recent plunge in traffic through mid-August on the nation's railroads?
Sorry to rain on your re-appointment parade Ben, but this report from The Association of American Railroads on U.S. rail traffic as of the week ending August 15th suggests that companies are cutting back on inventories rather than rebuilding them. Year-to-date through August 15th, 2009, the number of carloads originated fell 18.9 percent compared to 2008, which was a pretty weak year.
David Cay Johnston told me that these so-called intermodal statistics -- which reflect, say, carloads of merchandise which go from a train to a truck -- tell a powerful story of weak retail sales demand, since this is how retail products move from the factory to the consumer in the U.S.
And an analysis of the categories which were down at least 40 percent suggest that economic weakness is still holding back the economy. Consider these categories which have suffered at least 40 percent declines over 2008: Metallic Ores (-56 percent), Metals & Products (-54 percent) and Motor Vehicles and Equipment (-48 percent). I am not exactly sure what is in each of these categories but it sounds like people are not buying too many new cars or things that need metal.
There are so many statistics out there that it's probably possible to tell whatever story you want with some subset of them. But these numbers suggest that big chunks of the economy are still in free fall. I hope Bernanke knows of some other more encouraging economic statistics that overpower these bad railroad shipment numbers.
Otherwise, I might think he's just putting lipstick on a pig so he can spend a few more years as Fed Chair.