Container Freight Volume Increases Reflect Retail Optimism

Posted : 07/22/13 3:55 AM

Investors who are looking for early clues to the performance of retail stocks have been encouraged by recent growth in the amount of goods being transported in the US by road and rail. Based on marked increases in the volume of freight, investors see this as an important metric for gauging retail sales for the coming holiday season, as the major stores across the country stock their inventories for the end-of-year sales that they are forecasting.According to figures released by the Association of American Railroads, intermodal freight volumes spiked by 4% during the first two weeks of August this year. This amounts to 260,000 units, an increase of 6.1% on the same time last year. Overall, rail traffic was up by 2.7% during this period, with a 0.5% fall in bulk cargo and a significant dip of 11.4% in grain shipments. This underscores the importance of intermodal freight to the viability of the rail networks as more containerized freight is being transported across continental America, due to the increased efficiency resulting from upgrades to the network in recent years. Investors are looking to the increases in containerized freight as an indication of increased consumer demand with 72% of the cargo that is shipped in containers being made up of consumer goods like electronics and clothing. They are hopeful that the metrics are reflecting a change in consumer demand before it happens on the shop floor. This is in direct contrast to forecasts from some of the largest retailers like Wal-Mart and Macy’s Inc., that indicate that they will be winding back their overall earnings expectations for the year, with weak demand and sluggish sales in the first half of 2013 eating into their projected profits. At the same time, the increased efficiency of the intermodal networks has seen a boom in the value of the stocks of many of the largest freight companies in the country. Shares in Union Pacific have gone up in value by 228% since the end of 2008, and those of JB Hunt have also increased dramatically by 178%, as compared to the S&P 500 average of 84% for the same period. All of this indicates that, as America emerges from the Global Financial Crisis to reassert the strength of its economy, it is the transport industry and the intermodal freight sector in particular, that is leading the way to recovery.