Rail Time Indicators: A Review of Key Economic Trends Shaping Demand For Rail Transportation

Rail Time Indicators
A Review of Key Economic Trends Shaping Demand for Rail Transportation
Policy & Economics Department Association of American Railroads Washington, D.C.
April 6, 2012
Rail Time Indicators is issued monthly by the Policy and Economics Department of the Association of American Railroads. It is free of charge. To get on the e-mail distribution list for Rail Time Indicators, send a request including your name and business affiliation, if any, 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, 202-639-2326) or Shannon Stare (sstare@aar.org, 202-639-2322). Copyright 2012 by the Association of American Railroads. Reproduction or retransmittal of Rail Time Indicators within a company for internal use is allowed, as is reasonable redistribution outside a company (for example, passing it on to someone you think might be interested in it). Unless approved by the AAR, reproduction or retransmittal for commercial use is prohibited except for short excerpts or quotations. Uploading of Rail Time Indicators to a public web site is prohibited unless approved by the AAR. All media inquiries should be directed to Holly Arthur (harthur@aar.org, 202-639-2344). The last six editions of Rail Time Indicators are available on the AAR web site here. Rail traffic data in Rail Time Indicators are sometimes presented on a seasonally adjusted basis and sometimes on a non-seasonally adjusted basis. Because of the nature of the AARs weekly rail traffic data and the nature of rail traffic (e.g., daily data are not available; some months have four weeks of data and some have five; holidays may be in one rail traffic month one year and in a different month the next; rail traffic varies by the day of the week; some commodity categories can exhibit wide swings in carloads from month to month for reasons unrelated to seasonal variations; the weather can have significant effects on traffic), the seasonal-adjustment process for rail traffic is not completely precise. Seasonally adjusted rail traffic data should be considered a complement to, rather than a replacement for, unadjusted rail traffic data. 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.
SUMMARY OF MOST RECENT DATA

Economic Indicator U.S. Freight Rail Traffic (p. 2) Most Recent Data Not Seasonally Adjusted: Total carloads 5.8% (mainly because of a big decline in coal carloads); carloads excluding coal 2.4%; and intermodal 3.5% in March 2012 compared with March 2011. Seasonally Adjusted: Carloads in March 2012 3.4% from February 2012; intermodal in March 2012 2.3% over February 2012. Canadian Freight Rail Traffic (p. 4) Not Seasonally Adjusted: Carloads in March 2012 2.2% over March 2011; intermodal in March 2012 9.4% over March 2011. Seasonally Adjusted: Carloads in March 2012 1.9% from February 2012; intermodal in March 2012 1.5% over February 2012. Gross Domestic Product (p. 21) Purchasing Managers Index (p. 23) Non-Manufact. Index (p. 23) Manufacturing Inventories and Sales (p. 24) Industrial Production (p. 27) 3.0% in Q4 2011, according to the third estimate released on March 29. Same as second estimate released a month earlier. to 53.4 in March 2012 from 52.4 in February 2012. New orders to 54.5 in March 2012 from 54.9 in February 2012. to 56.0 in March 2012 from 57.3 in February 2012. Manufacturing sales 0.1%, manufacturing inventories 0.4%, and inventory-sales ratio 0.3% in February 2012 over January 2012. Overall industrial output was flat in February 2012 compared with January 2012 as weaker utility output ( 0.1%) and mining output ( 1.6%) offset higher manufacturing output ( 0.4%). 78.4% overall in February 2012, same as January 2012, but manufacturing to 78.2% in February from 77.9% in January. 120,000 net new jobs created in March 2012, down from 240,000 in February 2012. Unemployment rate to 8.2% in March 2012 from 8.3% in February 2012. 105 in February 2012 from January 2012 to 159,228 employees. Train and engine employment up 170 in February. to 70.2 in March 2012 from 71.6 in February 2012. 1.1% ($4.3 billion) in February 2012 over January 2012. Retail sales excluding gasoline stations 0.8% in February over January. to 14.3 million (annualized) in March 2012, down from 15.0 million in February 2012. to 698,000 annualized in Feb. 2012 from 706,000 in Jan. 2012. Three-month avg. down slightly in Feb., first decline since April 2011. 0.4% in February 2012 over January 2012, mainly due to gasoline; 2.9% for the year ending February 2012. to 299,324 on April 1, 2012 (19.6% of the fleet), up 9,819 cars from March 1, 2012.
Capacity Utilization (p. 29) Employment and Unemployment Rate (p. 30) Railroad Employment (p. 33) Consumer Confidence (p. 34) Retail Sales (p. 35)
Light Vehicle Sales (p. 36) Housing Starts (p. 37) Consumer Price Index (p. 39) Rail Freight Cars in Storage (p. 40)
Rail Time Indicators April 6, 2012
Page 1 of 40
U.S. AND CANADIAN FREIGHT RAILROAD TRAFFIC

What is it and why is it important? The Association of American Railroads (AAR) releases its Weekly Railroad Traffic report every Thursday morning. The report contains rail traffic data for the previous week. Weekly data are aggregated into monthly totals in Rail Time Indicators. Railroads reporting to the AAR collectively handle about 95% of total U.S. and Canadian freight rail traffic. AAR rail traffic data are reported as carloads or as intermodal units. Carload traffic is classified into one of 20 different commodity categories and is carried in a variety of rail car types (e.g., tank cars, covered hoppers, gondolas, boxcars, etc.). A unit of rail intermodal traffic is either a shipping container (about 85% of U.S. rail intermodal traffic) or a truck trailer (about 15%) carried on a railroad flat car. Intermodal is not included in carload figures. Commodity detail on the freight inside the container or trailer is not available. Freight railroading is a derived demand industry: demand for rail service occurs as a result of demand elsewhere in the economy for the products railroads haul. Thus, rail traffic is a useful gauge of broader economic activity, especially of the tangible economy.
What are the latest numbers for U.S. railroads? U.S. railroads originated 1,123,298 total carloads in March 2012, down 5.8% (69,190 carloads) from the same period in 2011. Total carloads averaged 280,825 per week in March 2012, down from 298,122 in March 2011. Coal and, to a lesser extent, grain were the main reasons for the decline. Excluding coal and grain, U.S. rail carloads were up 4.4% (24,752 carloads) in March 2012 over March 2011, though the 4.4% gain is the smallest gain for this category of rail traffic in six months (see chart on page 15).
% Change in Total U.S. Rail Carloads From Same Month Previous Year: Jan. 2006 - March 2012
20% 15% 10% 320,000
2011
Average Weekly U.S. Rail Carloads: All Commodities

(not seasonally adjusted)
360,000
2006 (peak year)
340,000
5% 0% -5%
300,000 280,000
2010
-10% -15%
2009
260,000
2012
240,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Data are weekly average originations for each month, exclude the U.S. operations of CN and CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
-20% -25% 2006 2007 2008 2009
March 2012 was down 5.8% from March 2011 and down 3.1% from March 2010.
2010
2011
2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
Intermodal continued to impress in March. U.S. railroads originated 928,350 containers and trailers in March 2012, up 3.5% (31,348 units) over March 2011 and the 28th straight yearover-year monthly increase (see the charts on the top of the next page). Average weekly U.S. intermodal loadings in March 2012 were the highest of any March in history. For carloads, coal was the main negative in March just as in February. U.S. railroads originated 451,741 carloads of coal in March 2012, down 15.8% (84,854 carloads) from March 2011. In other words, the decline in coal carloadings for the month was much larger than the decline in total carloadings for the month. Average weekly U.S. coal carloads in March 2012 were 112,935, the lowest weekly average for coal for any month since January 1996. In Q1 2012, total U.S. rail carloads were down 95,642 carloads (2.5% see chart on page 6), while coal carloads were down 168,193 carloads (9.8% see chart on page 14). Thus, coal was responsible for more than the total decline in carloads for the quarter as well.
Page 2 of 40
Average Weekly U.S. Rail Intermodal Traffic

260,000 250,000 240,000 230,000 220,000 210,000 200,000 190,000 180,000 170,000 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, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
% Change in U.S. Rail Intermodal Traffic From Same Month Previous Year: Jan. 2006 - March 2012
25% 20% 15%
2006 (peak year) 2012 2011
10% 5%
2009
0% -5% -10% -15% -20% -25% 2006 2007 2008 2009 2010 2011 2012
March 2012 was up 3.5% over March 2011 and up 14.3% over March 2010.
2010
The decline in coal carloads is largely due to three factors: 1) increased natural gas supplies (see the chart on the bottom left of page 11) have led to much lower natural gas prices, which in turn make electricity generated from natural gas more competitive relative to electricity generated from coal; 2) record-setting high temperatures throughout the country this winter have reduced demand for electricity overall and, therefore, coal (see the chart on the bottom right of page 11); and 3) ongoing pressure to reduce the environmental impact of electricity generation, another area for which natural gas currently has an advantage. For more on coal, see page 11. Carloads excluding coal were up 2.4% (15,664 carloads) in March 2012 over March 2011 (charts in the middle of page 15) and were up 3.5% (72,551 carloads) for the first quarter. Grain didnt help in March either. U.S. grain carloads were down 9.7% (9,088 carloads) in March 2012 from March 2011 (see page 13) and were down 10.5% (32,196 carloads) for the first quarter (see the chart on the middle left of page 14). All told, 12 of the 20 carload commodity categories tracked by the AAR saw carload gains in March 2012 over March 2011. Commodities with the biggest gains included petroleum and petroleum products (up 9,052 carloads, or 34.2% see the charts on the top of page 17); motor vehicle and parts (up 9,032 carloads, or 15.3% bottom of page 17); steel and other primary metal products (up 3,459 carloads, or 8.3% middle of page 16); crushed stone, gravel, and sand (up 3,211 carloads, or 4.8% middle of page 17); and metallic ores (overwhelmingly iron ore up 1,642 carloads, or 8.1% top of page 18). Carloads of an aggregation of commodities we call industrial products were up 4.0% in March 2012 over March 2011 (top of page 16). The table on page 5 has more commodity carload detail for March for U.S. railroads.
# of AAR Commodity Categories* With Year-Over-Year Gains For U.S. Railroads Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 11 13 16 19 19 17 13 16 14 15 13 16 2011 15 15 15 9 8 14 12 12 13 12 13 16 2012 11 14 12
In addition to coal and grain, commodities with carload declines *Out of 20. Source: AAR in March 2012 included chemicals (down 4,278 carloads, or 3.4% see page 12); nonmetallic minerals (down 1,863 carloads, or 9.7%); and farm products excluding grain (down 479 carloads, or 13.3%). 11 of the 20 commodity categories tracked by the AAR saw carload gains in the first quarter of 2012 over the first quarter of 2011. The table on page 6 has commodity detail for the first quarter for U.S. railroads. Seasonally adjusted total U.S. rail carloads were down 3.4% in March 2012 from February 2012; seasonally adjusted rail carloads excluding coal and grain were down 1.2% for the month; and seasonally adjusted U.S. rail intermodal traffic was up 2.3% in March 2012 over February 2012 (see the charts on page 19).
Page 3 of 40
What are the latest numbers for Canadian railroads? Canadian railroads (including their U.S. operations) originated 310,471 carloads in March 2012, up 2.2% (6,768 carloads) over March 2011. Canadian intermodal volume in March 2012 was 199,935 containers and trailers, an average of 49,984 per week, up 9.4% over March 2011, and the highest ever for a March in history. In the first quarter, Canadian carloads were up 5.4% (50,706 carloads) and intermodal volume was up 6.9% (41,126 units).
# of AAR Commodity Categories* With Year-Over-Year Gains For Canadian Railroads Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 14 13 17 17 16 14 16 16 15 16 15 19 2011 9 13 9 10 9 13 13 14 13 16 18 15 2012 15 18 14
14 of the 20 carload commodity categories tracked by the AAR saw increases on Canadian railroads in March. Commodities with increases included petroleum and petroleum products (up 4,608 carloads, or 27.8%); motor vehicles and parts (up 2,305 carloads, or 10.3%) and farm products excluding grain (up 1,838 carloads, or 17.1%). Commodities seeing *Out of 20. Source: AAR declines in March included chemicals (down 7,051 carloads, or 14.0%) and coal (down 2,105 carloads, or 6.2%). The table on page 7 has commodity detail for Canadian railroads in March 2012; page 8 has commodity detail for the first quarter for Canadian railroads. Seasonally adjusted Canadian rail carloads in March 2012 were down 1.9% from February 2012, while seasonally adjusted intermodal volumes in March 2012 were up 1.5% over February 2012 (see the charts on the bottom of page 19).
% Change in Total Canadian Rail Carloads From Same Month Previous Year: Jan. 2006 - March 2012
40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35%
Avg. Weekly Canadian Rail Carloads: All Commodities

90,000 85,000 80,000 75,000 70,000 65,000 60,000
2009 2011 2010 2006 (peak year) 2012
55,000 50,000 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. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
2006
2007
2008
2009
2010
2011
2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
Average Weekly Canadian Rail Intermodal Traffic

54,000
2012 2011 (peak year) 2008
% Change in Total Canadian Intermodal Traffic From Same Month Previous Year: Jan. 2006 - March 2012
30% 25% 20% 15% 10% 5% 0% -5% -10%
50,000 46,000
2010
42,000 38,000
2009
-15% -20% Jul Aug Sep Oct Nov Dec -25%
34,000 Jan Feb Mar Apr May Jun

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
2006
2007
2008
2009
2010
2011
2012
Page 4 of 40
U.S. RAIL TRAFFIC: MARCH 2012*

(4 weeks ending March 31, 2012) Commodity Agricultural & food products Grain Farm products excl. grain Grain mill products (1) Food products Chemicals and petroleum Chemicals Petroleum & petr. products (2) Coal Forest products Primary forest products (3) Lumber & wood products Pulp & paper products Metallic ores and metals Metallic ores (4) Coke Primary metal products (5) Iron & steel scrap Motor vehicles & parts Nonmetallic minerals & prod. Crushed stone, gravel, sand Nonmetallic minerals (6) Stone, clay & glass prod. (7) Other Waste & nonferrous scrap (8) All other carloads TOTAL ALL CARLOADS Trailers Containers TOTAL ALL INTERMODAL Mar 2012 151,724 84,487 3,136 37,896 26,205 157,474 121,945 35,529 451,741 42,638 5,561 12,874 24,203 101,126 21,949 13,601 45,149 20,427 67,957 117,340 70,446 17,372 29,522 33,298 12,326 20,972 1,123,298 121,371 806,979 928,350 Mar 2011 161,686 93,575 3,615 37,874 26,622 152,700 126,223 26,477 536,595 41,476 5,584 12,012 23,880 94,721 20,307 13,066 41,690 19,658 58,925 114,550 67,235 19,235 28,080 31,835 12,592 19,243 1,192,488 134,915 762,087 897,002 Mar 2010 162,208 91,895 3,509 40,940 25,864 138,145 114,824 23,321 538,277 38,710 6,855 11,207 20,648 86,722 14,939 14,004 38,502 19,277 50,395 111,808 65,148 19,566 27,094 33,082 14,424 18,658 1,159,347 125,293 686,828 812,121 Difference '12-'11 '12-'10 -9,962 -9,088 -479 22 -417 4,774 -4,278 9,052 -84,854 1,162 -23 862 323 6,405 1,642 535 3,459 769 9,032 2,790 3,211 -1,863 1,442 1,463 -266 1,729 -69,190 -13,544 44,892 31,348 -10,484 -7,408 -373 -3,044 341 19,329 7,121 12,208 -86,536 3,928 -1,294 1,667 3,555 14,404 7,010 -403 6,647 1,150 17,562 5,532 5,298 -2,194 2,428 216 -2,098 2,314 -36,049 -3,922 120,151 116,229 % Change '12-'11 '12-'10 -6.2% -9.7% -13.3% 0.1% -1.6% 3.1% -3.4% 34.2% -15.8% 2.8% -0.4% 7.2% 1.4% 6.8% 8.1% 4.1% 8.3% 3.9% 15.3% 2.4% 4.8% -9.7% 5.1% 4.6% -2.1% 9.0% -5.8% -10.0% 5.9% 3.5% -6.5% -8.1% -10.6% -7.4% 1.3% 14.0% 6.2% 52.3% -16.1% 10.1% -18.9% 14.9% 17.2% 16.6% 46.9% -2.9% 17.3% 6.0% 34.8% 4.9% 8.1% -11.2% 9.0% 0.7% -14.5% 12.4% -3.1% -3.1% 17.5% 14.3%
(1) - flour, animal feed, corn syrup, corn starch, soybean meal, DDGs, etc. (2) - crude petroleum and all products of petroleum refining (liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.) (3) - wood raw materials such as pulpwood and wood chips (4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.
(6) - phosphate
(5) - primarily iron & steel; some aluminum, copper, etc. rock, rock salt, crude sulphur, clay, etc. (7) - cement, ground earths or minerals, gypsum, etc. (8) - scrap paper, construction debris, ashes, etc.
*Data are originations not seasonally adjusted. Includes BNSF, CSX, KCS, NS, UP, Birmingham Southern, Florida East Coast, Lake Superior & Ishpeming, and Paducah & Louisville. Excludes CN's and CP's U.S. operations. Source: AAR Week ly Railroad Traffic
Average Weekly U.S. Rail Traffic: Total Carloads + Intermodal Units

Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S. operations of CN and CP, and reflect revisions to original reporting. Source: AAR
% Change in U.S. Rail Carloads + Intermodal Units From Same Month Prev. Year: Jan. 2006 - March 2012
20% 15% 10%
2006 (peak year)
2012
2011
5% 0%
2010 2009
-5% -10% -15% -20% -25% 2006 2007 2008 2009 2010 2011 2012
March 2012 was down 1.8% from March 2011 and up 4.1% over March 2010.
Page 5 of 40
U.S. RAIL TRAFFIC: FIRST QUARTER 2012*

(13 weeks ending March 31, 2012) Commodity Agricultural & food products Grain Farm products excl. grain Grain mill products (1) Food products Chemicals and petroleum Chemicals Petroleum & petr. products (2) Coal Forest products Primary forest products (3) Lumber & wood products Pulp & paper products Metallic ores and metals Metallic ores (4) Coke Primary metal products (5) Iron & steel scrap Motor vehicles & parts Nonmetallic minerals & prod. Crushed stone, gravel, sand Nonmetallic minerals (6) Stone, clay & glass prod. (7) Other Waste & nonferrous scrap (8) All other carloads TOTAL ALL CARLOADS Trailers Containers TOTAL ALL INTERMODAL Q1 2012 492,445 273,542 10,585 123,897 84,421 504,996 393,871 111,125 1,554,082 138,800 19,676 39,417 79,707 328,933 76,561 44,348 143,446 64,578 203,866 356,051 210,401 55,942 89,708 99,917 38,361 61,556 3,679,090 391,668 2,536,777 2,928,445 Q1 2011 528,905 305,738 12,080 125,739 85,348 485,741 399,163 86,578 1,722,275 133,371 19,890 35,401 78,080 298,921 64,762 42,096 129,084 62,979 171,651 336,374 193,058 60,001 83,315 97,494 38,460 59,034 3,774,732 428,414 2,427,859 2,856,273 Q1 2010 528,970 294,930 11,550 137,600 84,890 452,061 373,055 79,006 1,658,296 124,643 21,429 33,068 70,146 258,590 41,065 43,306 114,632 59,587 153,993 317,910 177,770 60,190 79,950 96,872 43,085 53,787 3,591,335 401,755 2,225,559 2,627,314 Difference '12-'11 '12-'10 -36,460 -32,196 -1,495 -1,842 -927 19,255 -5,292 24,547 -168,193 5,429 -214 4,016 1,627 30,012 11,799 2,252 14,362 1,599 32,215 19,677 17,343 -4,059 6,393 2,423 -99 2,522 -95,642 -36,746 108,918 72,172 -36,525 -21,388 -965 -13,703 -469 52,935 20,816 32,119 -104,214 14,157 -1,753 6,349 9,561 70,343 35,496 1,042 28,814 4,991 49,873 38,141 32,631 -4,248 9,758 3,045 -4,724 7,769 87,755 -10,087 311,218 301,131 % Change '12-'11 '12-'10 -6.9% -10.5% -12.4% -1.5% -1.1% 4.0% -1.3% 28.4% -9.8% 4.1% -1.1% 11.3% 2.1% 10.0% 18.2% 5.3% 11.1% 2.5% 18.8% 5.8% 9.0% -6.8% 7.7% 2.5% -0.3% 4.3% -2.5% -8.6% 4.5% 2.5% -6.9% -7.3% -8.4% -10.0% -0.6% 11.7% 5.6% 40.7% -6.3% 11.4% -8.2% 19.2% 13.6% 27.2% 86.4% 2.4% 25.1% 8.4% 32.4% 12.0% 18.4% -7.1% 12.2% 3.1% -11.0% 14.4% 2.4% -2.5% 14.0% 11.5%
(5) - primarily iron & steel; some aluminum, copper, etc. (6) - phosphate rock, rock salt, crude sulphur, clay, etc. (7) - cement, ground earths or minerals, gypsum, etc. (8) - scrap paper, construction debris, ashes, etc.
% Change in Total U.S. Rail Carloads From Same Quarter Previous Year: Q1 2006 - Q1 2012
20% 15% 10% 5% 0% -5% -10% -15% -20% -25% 2006 2007 2008 2009 2010 2011 2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic Q1 2012: -2.5%
% Change in U.S. Intermodal Traffic From Same Quarter Previous Year: Q1 2006 - Q1 2012
20% 15% 10% 5% 0% -5%
Q1 2012: +2.5%
-10% -15% -20% -25% 2006 2007 2008 2009 2010 2011 2012
Page 6 of 40
CANADIAN RAIL TRAFFIC: MARCH 2012*

(4 weeks ending March 31, 2012) Commodity Agricultural & food products Grain Farm products excl. grain Grain mill products (1) Food products Chemicals and petroleum Chemicals Petroleum & petr. products (2) Coal Forest products Primary forest products (3) Lumber & wood products Pulp & paper products Metallic ores and metals Metallic ores (4) Coke Primary metal products (5) Iron & steel scrap Motor vehicles & parts Nonmetallic minerals & prod. Crushed stone, gravel, sand Nonmetallic minerals (6) Stone, clay & glass prod. (7) Other Waste & nonferrous scrap (8) All other carloads TOTAL ALL CARLOADS Trailers Containers TOTAL ALL INTERMODAL Mar 2012 63,645 35,961 12,607 5,966 9,111 64,354 43,163 21,191 31,742 32,330 7,024 11,444 13,862 64,687 47,532 2,577 10,299 4,279 24,671 20,662 8,485 6,371 5,806 8,380 2,331 6,049 310,471 5,470 194,465 199,935 Mar 2011 63,365 36,407 10,769 7,123 9,066 66,797 50,214 16,583 33,847 32,034 6,234 10,946 14,854 60,841 46,664 1,580 9,162 3,435 22,366 18,630 7,171 6,543 4,916 5,823 1,190 4,633 303,703 6,494 176,203 182,697 Mar 2010 65,404 39,269 11,215 6,646 8,274 58,788 43,382 15,406 26,797 29,338 6,193 8,814 14,331 70,056 54,717 1,917 9,970 3,452 20,098 18,418 6,969 6,571 4,878 6,220 1,537 4,683 295,119 6,211 169,453 175,664 Difference '12-'11 '12-'10 280 -446 1,838 -1,157 45 -2,443 -7,051 4,608 -2,105 296 790 498 -992 3,846 868 997 1,137 844 2,305 2,032 1,314 -172 890 2,557 1,141 1,416 6,768 -1,024 18,262 17,238 -1,759 -3,308 1,392 -680 837 5,566 -219 5,785 4,945 2,992 831 2,630 -469 -5,369 -7,185 660 329 827 4,573 2,244 1,516 -200 928 2,160 794 1,366 15,352 -741 25,012 24,271 % Change '12-'11 '12-'10 0.4% -1.2% 17.1% -16.2% 0.5% -3.7% -14.0% 27.8% -6.2% 0.9% 12.7% 4.5% -6.7% 6.3% 1.9% 63.1% 12.4% 24.6% 10.3% 10.9% 18.3% -2.6% 18.1% 43.9% 95.9% 30.6% 2.2% -15.8% 10.4% 9.4% -2.7% -8.4% 12.4% -10.2% 10.1% 9.5% -0.5% 37.6% 18.5% 10.2% 13.4% 29.8% -3.3% -7.7% -13.1% 34.4% 3.3% 24.0% 22.8% 12.2% 21.8% -3.0% 19.0% 34.7% 51.7% 29.2% 5.2% -11.9% 14.8% 13.8%
*CN and CP, including their U.S. operations. Data are originations not seasonally adjusted. Source: AAR Week ly Railroad Traffic
Average Weekly Canadian Rail Traffic: Total Carloads + Intermodal Units

140,000
2007 (peak year) 2012
% Change in Canadian Carloads + Intermodal Units From Same Month Prev. Year: Jan. 2006 - March 2012
30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30%
130,000 120,000
2011
2010
110,000
2009
Data are weekly average originations for each month, are not seasonally adjusted, include CN and CP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR
2006
2007
2008
2009
2010
2011
2012
Page 7 of 40
CANADIAN RAIL TRAFFIC: FIRST QUARTER 2012*

(13 weeks ending March 31, 2012) Commodity Agricultural & food products Grain Farm products excl. grain Grain mill products (1) Food products Chemicals and petroleum Chemicals Petroleum & petr. products (2) Coal Forest products Primary forest products (3) Lumber & wood products Pulp & paper products Metallic ores and metals Metallic ores (4) Coke Primary metal products (5) Iron & steel scrap Motor vehicles & parts Nonmetallic minerals & prod. Crushed stone, gravel, sand Nonmetallic minerals (6) Stone, clay & glass prod. (7) Other Waste & nonferrous scrap (8) All other carloads TOTAL ALL CARLOADS Trailers Containers TOTAL ALL INTERMODAL Q1 2012 206,439 116,580 40,396 20,745 28,718 201,960 133,727 68,233 108,861 100,919 20,906 35,468 44,545 209,491 158,324 6,258 30,914 13,995 73,877 61,633 24,246 19,638 17,749 23,102 6,724 16,378 986,282 17,789 615,145 632,934 Q1 2011 196,757 110,404 35,891 22,386 28,076 211,409 153,317 58,092 96,246 99,055 19,174 31,816 48,065 193,285 150,292 4,256 27,045 11,692 66,577 52,885 18,715 19,266 14,904 19,362 3,794 15,568 935,576 19,244 572,564 591,808 Q1 2010 206,304 124,172 35,449 20,720 25,963 192,963 137,145 55,818 93,767 92,672 19,694 27,694 45,284 212,973 165,414 5,860 31,136 10,563 61,677 56,091 19,074 21,818 15,199 17,473 4,187 13,286 933,920 19,728 547,828 567,556 Difference '12-'11 '12-'10 9,682 6,176 4,505 -1,641 642 -9,449 -19,590 10,141 12,615 1,864 1,732 3,652 -3,520 16,206 8,032 2,002 3,869 2,303 7,300 8,748 5,531 372 2,845 3,740 2,930 810 50,706 -1,455 42,581 41,126 135 -7,592 4,947 25 2,755 8,997 -3,418 12,415 15,094 8,247 1,212 7,774 -739 -3,482 -7,090 398 -222 3,432 12,200 5,542 5,172 -2,180 2,550 5,629 2,537 3,092 52,362 -1,939 67,317 65,378 % Change '12-'11 '12-'10 4.9% 5.6% 12.6% -7.3% 2.3% -4.5% -12.8% 17.5% 13.1% 1.9% 9.0% 11.5% -7.3% 8.4% 5.3% 47.0% 14.3% 19.7% 11.0% 16.5% 29.6% 1.9% 19.1% 19.3% 77.2% 5.2% 5.4% -7.6% 7.4% 6.9% 0.1% -6.1% 14.0% 0.1% 10.6% 4.7% -2.5% 22.2% 16.1% 8.9% 6.2% 28.1% -1.6% -1.6% -4.3% 6.8% -0.7% 32.5% 19.8% 9.9% 27.1% -10.0% 16.8% 32.2% 60.6% 23.3% 5.6% -9.8% 12.3% 11.5%
(5) - primarily iron & steel; some aluminum, copper, etc. rock, rock salt, crude sulphur, clay, etc. (7) - cement, ground earths or minerals, gypsum, etc. (8) - scrap paper, construction debris, ashes, etc.
(6) - phosphate
% Change in Total Canadian Rail Carloads From Same Quarter Previous Year: Q1 2006 - Q1 2012
30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 2006 2007 2008 2009 2010
% Change in Canadian Intermodal Traffic From Same Quarter Previous Year: Q1 2006 - Q1 2012
25% 20% 15% 10% 5% 0%
Q1 2012: +5.4%
-5% -10% -15% -20% -25%

Q1 2012: +6.9%
2011
2012
2006
2007
2008
2009
2010
2011
2012
Page 8 of 40
COMBINED U.S. AND CANADIAN RAIL TRAFFIC: MARCH 2012*

(4 weeks ending March 31, 2012) Commodity Agricultural & food products Grain Farm products excl. grain Grain mill products (1) Food products Chemicals and petroleum Chemicals Petroleum & petr. products (2) Coal Forest products Primary forest products (3) Lumber & wood products Pulp & paper products Metallic ores and metals Metallic ores (4) Coke Primary metal products (5) Iron & steel scrap Motor vehicles & parts Nonmetallic minerals & prod. Crushed stone, gravel, sand Nonmetallic minerals (6) Stone, clay & glass prod. (7) Other Waste & nonferrous scrap (8) All other carloads TOTAL ALL CARLOADS Trailers Containers TOTAL ALL INTERMODAL Mar 2012 215,369 120,448 15,743 43,862 35,316 221,828 165,108 56,720 483,483 74,968 12,585 24,318 38,065 165,813 69,481 16,178 55,448 24,706 92,628 138,002 78,931 23,743 35,328 41,678 14,657 27,021 1,433,769 126,841 1,001,444 1,128,285 Mar 2011 225,051 129,982 14,384 44,997 35,688 219,497 176,437 43,060 570,442 73,510 11,818 22,958 38,734 155,562 66,971 14,646 50,852 23,093 81,291 133,180 74,406 25,778 32,996 37,658 13,782 23,876 1,496,191 141,409 938,290 1,079,699 Mar 2010 227,612 131,164 14,724 47,586 34,138 196,933 158,206 38,727 565,074 68,048 13,048 20,021 34,979 156,778 69,656 15,921 48,472 22,729 70,493 130,226 72,117 26,137 31,972 39,302 15,961 23,341 1,454,466 131,504 856,281 987,785 Difference '12-'11 '12-'10 -9,682 -9,534 1,359 -1,135 -372 2,331 -11,329 13,660 -86,959 1,458 767 1,360 -669 10,251 2,510 1,532 4,596 1,613 11,337 4,822 4,525 -2,035 2,332 4,020 875 3,145 -62,422 -14,568 63,154 48,586 -12,243 -10,716 1,019 -3,724 1,178 24,895 6,902 17,993 -81,591 6,920 -463 4,297 3,086 9,035 -175 257 6,976 1,977 22,135 7,776 6,814 -2,394 3,356 2,376 -1,304 3,680 -20,697 -4,663 145,163 140,500 % Change '12-'11 '12-'10 -4.3% -7.3% 9.4% -2.5% -1.0% 1.1% -6.4% 31.7% -15.2% 2.0% 6.5% 5.9% -1.7% 6.6% 3.7% 10.5% 9.0% 7.0% 13.9% 3.6% 6.1% -7.9% 7.1% 10.7% 6.3% 13.2% -4.2% -10.3% 6.7% 4.5% -5.4% -8.2% 6.9% -7.8% 3.5% 12.6% 4.4% 46.5% -14.4% 10.2% -3.5% 21.5% 8.8% 5.8% -0.3% 1.6% 14.4% 8.7% 31.4% 6.0% 9.4% -9.2% 10.5% 6.0% -8.2% 15.8% -1.4% -3.5% 17.0% 14.2%
*Data are originations and are not seasonally adjusted. Source: AAR Week ly Railroad Traffic
Average Weekly U.S. + Canadian Rail Traffic: Total Carloads + Intermodal Units
750,000 725,000 700,000 675,000 650,000 625,000 600,000 575,000 550,000 525,000 500,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Data are weekly average originations for each month, are not seasonally adjusted, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
% Change in Combined U.S. + Canadian Rail Carloads + Intermodal Units From Same Month Previous Year: Jan. 2006 - March 2012
20% 15% 10%
2006 (peak year)
2012
2011
5% 0% -5%
2010
2009
-10% -15% -20% -25% -30% 2006 2007 2008 2009
2010
2011
2012
Data are based on weekly average originations for each month, are not seasonally adjusted, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
Page 9 of 40
COMBINED U.S. AND CANADIAN RAIL TRAFFIC: FIRST QUARTER 2012*

(13 weeks ending March 31, 2012) Commodity Agricultural & food products Grain Farm products excl. grain Grain mill products (1) Food products Chemicals and petroleum Chemicals Petroleum & petr. products (2) Coal Forest products Primary forest products (3) Lumber & wood products Pulp & paper products Metallic ores and metals Metallic ores (4) Coke Primary metal products (5) Iron & steel scrap Motor vehicles & parts Nonmetallic minerals & prod. Crushed stone, gravel, sand Nonmetallic minerals (6) Stone, clay & glass prod. (7) Other Waste & nonferrous scrap (8) All other carloads TOTAL ALL CARLOADS Trailers Containers TOTAL ALL INTERMODAL Q1 2012 698,884 390,122 50,981 144,642 113,139 706,956 527,598 179,358 1,662,943 239,719 40,582 74,885 124,252 538,424 234,885 50,606 174,360 78,573 277,743 417,684 234,647 75,580 107,457 123,019 45,085 77,934 4,665,372 409,457 3,151,922 3,561,379 Q1 2011 725,662 416,142 47,971 148,125 113,424 697,150 552,480 144,670 1,818,521 232,426 39,064 67,217 126,145 492,206 215,054 46,352 156,129 74,671 238,228 389,259 211,773 79,267 98,219 116,856 42,254 74,602 4,710,308 447,658 3,000,423 3,448,081 Q1 2010 735,274 419,102 46,999 158,320 110,853 645,024 510,200 134,824 1,752,063 217,315 41,123 60,762 115,430 471,563 206,479 49,166 145,768 70,150 215,670 374,001 196,844 82,008 95,149 114,345 47,272 67,073 4,525,255 421,483 2,773,387 3,194,870 Difference '12-'11 '12-'10 -26,778 -26,020 3,010 -3,483 -285 9,806 -24,882 34,688 -155,578 7,293 1,518 7,668 -1,893 46,218 19,831 4,254 18,231 3,902 39,515 28,425 22,874 -3,687 9,238 6,163 2,831 3,332 -44,936 -38,201 151,499 113,298 -36,390 -28,980 3,982 -13,678 2,286 61,932 17,398 44,534 -89,120 22,404 -541 14,123 8,822 66,861 28,406 1,440 28,592 8,423 62,073 43,683 37,803 -6,428 12,308 8,674 -2,187 10,861 140,117 -12,026 378,535 366,509 % Change '12-'11 '12-'10 -3.7% -6.3% 6.3% -2.4% -0.3% 1.4% -4.5% 24.0% -8.6% 3.1% 3.9% 11.4% -1.5% 9.4% 9.2% 9.2% 11.7% 5.2% 16.6% 7.3% 10.8% -4.7% 9.4% 5.3% 6.7% 4.5% -1.0% -8.5% 5.0% 3.3% -4.9% -6.9% 8.5% -8.6% 2.1% 9.6% 3.4% 33.0% -5.1% 10.3% -1.3% 23.2% 7.6% 14.2% 13.8% 2.9% 19.6% 12.0% 28.8% 11.7% 19.2% -7.8% 12.9% 7.6% -4.6% 16.2% 3.1% -2.9% 13.6% 11.5%
*Data are originations and are not seasonally adjusted. Source: AAR Week ly Railroad Traffic
% Change in Total U.S. + Canadian Rail Carloads From Same Quarter Prev. Year: Q1 2006 - Q1 2012
20% 15% 10% 5% 0% -5%
Q1 2012: -1.0%
% Change in Total U.S. + Canadian Intermodal Traffic From Same Quarter Previous Year: Q1 2006 - Q1 2012
20% 15% 10% 5% 0% -5%
Q1 2012: +3.3%
-10% -15% -20% -25% 2006 2007 2008 2009 2010 2011 2012
Data are based on originations and are not seasonally adjusted. Source: AAR Weekly Railroad Traffic
-10% -15% -20% -25% 2006 2007 2008 2009 2010 2011 2012
Data are based on originations and are not seasonally adjusted. Source: AAR Weekly Railroad Traffic
Page 10 of 40
COAL Coals woes continue. U.S. coal carloads were down 15.8% (84,854 carloads) in March 2012 from March 2011, matching May 2009 as the largest year-over-year percentage decline in coal carloads for a single month on record. Canadian railroads got into the act too: their coal carloads were down 6.2% in March, their first decline in six months. The chart on the bottom right shows the huge declines in heating degree days this winter in cold weather states that depend heavily on coal-fired electricity generation. The warm weather has meant lower electricity generation from coal and fewer rail carloads of coal.
Average Weekly U.S. Rail Carloads of Coal
160,000
2008 (peak year)
% Change in U.S. Rail Carloads of Coal From Same Month Previous Year: Jan. 2006 - March 2012
15% 10% 5% 0%
150,000
140,000
130,000
2010 2009 2011
-5% -10% -15% Jul Aug Sep Oct Nov Dec -20%
120,000
2012

2006
2007
2008
2009
2010
2011
2012
Avg. Weekly Canadian Rail Carloads of Coal

10,000 9,000 8,000 7,000
2010 2012 2011
% Change in Canadian Carloads of Coal From Same Month Previous Year: Jan. 2006 - March 2012
60% 50% 40% 30% 20% 10% 0%
6,000
2009 2008
-10% -20% -30%

-40%
2006
2007
2008
2009
2010
2011
2012
U.S. Natural Gas Production: Jan. 2006 - Dec. 2011

(Trillion Cubic Feet)
2.8 2.6 -4% 2.4 2.2 2.0 1.8 1.6 1.4 1.2 2006 2007 2008 2009 2010 2011 -24%
Source: Energy Information Administration
% Change in Cumulative Heating Degree Days Compared With Normal as of March 2012*
0%
trend line
-8%
CO
-12% -16% -20%
WY
UT MT PA IL IN OH ND MI WI IA MN MO WV KY
*Year beginning July 2011
Source: National Weather Service
Page 11 of 40
CHEMICALS U.S. rail carloads of chemicals were down 3.4% (4,278 carloads) in March 2012 from March 2011, but this was an extremely tough comp: March 2011 had the highest average weekly chemical carloads of any month in history. Year-over-year Canadian rail carloads of chemicals have fallen for six straight months, including 14.0% in March 2012. The chart on the bottom right shows that chemicals accounted for approximately $8.9 billion of gross revenue for U.S. Class I railroads in 2011, third behind coal and intermodal.
Avg. Weekly U.S. Rail Carloads of Chemicals
33,000 32,000
2012 2011 2007 (peak year)
% Change in U.S. Rail Carloads of Chemicals From Same Month Previous Year: Jan. 2006 - March 2012
20% 15% 10% 5%
31,000 30,000 29,000

2010
28,000 27,000 26,000 25,000 24,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0% -5% -10%
2009
-15% -20% -25% 2006 2007 2008 2009
2010
2011
2012
Avg. Weekly Canadian Rail Carloads of Chemicals

13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
% Change in Canadian Carloads of Chemicals From Same Month Previous Year: Jan. 2009 - March 2012
60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 2009 2010
2011
2012
2010 2009
2008
2011
2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S. operations), and reflect revisions to original reporting. Due to comparability issues, data prior to 2009 are not available. Source: AAR Weekly Railroad Traffic
Class I Rail Tons Originated by Commodity: 2011

Total = 1.89 billion
Farm products - 156.5 mil. Lumber - 25.5 mil. Pulp & paper - 31.6 mil. Chemicals - 192.2 mil. Coal 816.0 mil.
Class I Gross Revenue by Commodity: 2011

($ billions)
Farm products $5.6 Coal $16.1 Lumber & wood $1.4 Pulp & paper $2.1 Chemicals $8.9 Primary metal products $2.4 Food $5.1 All others $7.1 Nonmetallic minerals $2.3 Misc. mixed shipments* $8.2 Transp. equip. $4.4 Stone, clay prod. $1.6
*Mostly intermodal. Intermodal is also disbursed in individual commodity categories. Source: AAR
Total = $65.3 billion
Primary metal prod. - 49.1 mil.
Nonmet. minerals. - 127.8 mil. Transp. equip. - 26.6 mil. Stone, clay, glass prod. - 41.8 mil. Food 107.3 mil. Other 194.5 mil. Misc. mixed shipments* - 116.6 mil.
*Mostly intermodal. Intermodal is also disbursed in individual commodity categories. Source: AAR
Page 12 of 40
GRAIN Like coal, grains woes continue. U.S. rail carloads of grain were down 9.7% (9,088 carloads) in March 2012 and down 10.5% (32,196 carloads) in the first quarter of 2012 compared with the same period in 2011, largely because U.S. grain exports are down (see chart bottom left). Year-over-year U.S. grain carloads have now fallen for 9 straight months. The USDAs Agricultural Marketing Service recently updated a modal analysis of grain movements (see here). As the chart on the bottom right shows, rail market share, according to USDA data, has been trending down and truck share has been trending up, due largely to more truck movements of corn to ethanol plants.
Average Weekly U.S. Rail Carloads of Grain
28,000 26,000 24,000
2010
% Change in U.S. Rail Carloads of Grain From Same Month Previous Year: Jan. 2006 - March 2012
30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30%
22,000 20,000 18,000

2009 2011
2012
2008
2006
2007
2008
2009
2010
2011
2012
Average Weekly Canadian Rail Carloads of Grain

11,000 10,500 10,000
2009 2010
% Change in Canadian Carloads of Grain From Same Month Previous Year: Jan. 2006 - March 2012
30%
20%
9,500 9,000
2012
10%
0%
8,500 8,000 7,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -20% 2006 2007 2008 2009 2010 2011 2012
Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic Data are weekly average originations for each month, are not seasonally adjusted, include CN and CP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR
2011
-10%
2008
Weekly U.S. Rail Carloads of Grain to U.S. Ports: January 2008 - March 2012
13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Modal Shares for Total U.S. Grain Movements: 2001-2010

70% 60%
2008
Truck
50% 40%
Railroad
30%
2010 2009 2012 2011
20% 10% 0% '01 '02 '03 '04
Barge
'05
'06
'07
'08
'09
'10
Data are four-month moving averages. Month labels are approximate. Source: USDA
Source: USDA Agricultural Marketing Service
Page 13 of 40
QUARTERLY CHANGES, SELECT COMMODITIES
% Change in Total U.S. Rail Carloads of Coal From Same Quarter Previous Year: Q1 2006 - Q1 2012
8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% -16% -18% 2006 2007 2008 2009 2010
% Change in Total U.S. Rail Carloads of Chemicals From Same Quarter Prev. Year: Q1 2006 - Q1 2012
20% 15% 10% 5% 0% -5%
Q1 2012: -1.3%
-10%
Q1 2012: -9.8%
-15% -20% 2006 2007 2008 2009 2010 2011 2012
2011
2012
% Change in Total U.S. Rail Carloads of Grain From Same Quarter Prev. Year: Q1 2006 - Q1 2012
20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 2006 2007 2008 2009 2010 2011 2012
Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic Q1 2012: -10.5%
% Change in U.S. Rail Carloads Excluding Coal and Grain From Same Qtr. Prev. Year: Q1 2006 - Q1 2012
25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% 2006 2007 2008 2009 2010
Q1 2012: +6.0%
2011
2012
% Change in U.S. + Canadian Rail Carloads of Motor Vehicles* From Same Qtr. Prev. Year: Q1 2006 - Q1 2012
50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% 2006 2007 2008 2009 2010 2011 2012
*Includes parts. Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S. operations), and reflect revisions to original reporting. Source: AAR Q1 2012: +16.6%
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70%
% Change in Total U.S. Rail Carloads of Steel and Other Primary Metal Products From Same Quarter Previous Year: Q1 2006 - Q1 2012
Q1 2012: +11.1%
2006
2007
2008
2009
2010
2011
2012
Page 14 of 40
CARLOAD AND INTERMODAL TOTALS

U.S. Rail Carload Traffic: Jan. 2006 - March 2012
375,000 350,000 325,000 300,000 275,000 250,000 225,000 200,000 175,000 150,000 2006 2007 2008 2009 2010 2011 2012 125,000 100,000 225,000 200,000 175,000 150,000
U.S. Rail Intermodal Traffic: Jan. 2006 - March 2012

275,000 250,000
2006
2007
2008
2009
2010
2011
2012
Data are weekly average originations for each month, are not seasonally adjusted, and exclude U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
Data are weekly average originations for each month, are not seasonally adjusted, and exclude U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
ALL COMMODITIES EXCLUDING COAL

Average Weekly U.S. Rail Carloads: All Commodities Excluding Coal
% Change in U.S. Rail Carloads Excluding Coal From Same Month Previous Year: Jan. 2006 - March 2012
30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35%
2006 (peak year)
2012
2011
2009
2010
2006
2007
2008
2009
2010
2011
2012
ALL COMMODITIES EXCLUDING COAL AND GRAIN

Average Weekly U.S. Rail Carloads: All Commodities Excluding Coal and Grain
% Change in U.S. Rail Carloads Excl. Coal & Grain From Same Month Prev. Year: Jan. 2006 - March 2012
30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35%
2006 (peak year)
2012
2011
2010 2009
2006
2007
2008
2009
2010
2011
2012
Page 15 of 40
INDUSTRIAL PRODUCTS
Avg. Weekly U.S. Rail Carloads: Industrial Products*
130,000
2006 (peak year)
% Change in U.S. Rail Carloads of Industrial Products From Same Month Prev. Year: Jan. 2006 - March 2012*
35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% 2006 2007 2008 2009
120,000 110,000 100,000 90,000 80,000 70,000

2009 2010 2012 2011
*Data include chemicals; paper; metal products; autos; crushed stone and gravel; metallic ores; and stone and glass products. Data are weekly average originations for each month and exclude the U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
2010
2011
2012
*Data include chemicals; paper; metal products; autos; crushed stone and gravel; metallic ores; and stone and glass products. Data are based on weekly average originations for each month and exclude the U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic
PRIMARY METAL PRODUCTS (MAINLY IRON AND STEEL)

Average Weekly U.S. Rail Carloads of Steel and Other Primary Metal Products
14,000 12,000
2012 2011 2008
% Change in U.S. Rail Carloads of Steel and Other Primary Metal Products From Same Month Previous Year: Jan. 2006 - March 2012
100% 80% 60% 40%
10,000
2010
20% 0%
8,000
2009
-20% -40% -60% -80% 2006 2007 2008 2009
2010
2011
2012
IRON AND STEEL SCRAP

Average Weekly U.S. Rail Carloads of Iron and Steel Scrap
7,000 120% 6,000
2012 2010 2011
% Change in U.S. Rail Carloads of Iron and Steel Scrap From Same Month Previous Year: Jan. 2009 - March 2012
100%
2008
80% 60% 40% 20% 0% -20%
5,000 4,000 3,000

2009
-40% -60% Jul Aug Sep Oct Nov Dec -80% 2009 2010 2011 2012
Data are based on originations, are not seasonally adjusted and exclude U.S. operations of CN and CP. Data prior to 2009 are not available. Source: AAR Weekly Railroad Traffic

Page 16 of 40
PETROLEUM & PETROLEUM PRODUCTS (CRUDE PETROLEUM, LPGs, ASPHALT, FUEL OIL, LUBRICATING OILS, ETC.)
Average Weekly U.S. Rail Carloads of Petroleum and Petroleum Products
% Change in U.S. Rail Carloads of Petroleum and Petroleum Products From Same Month Previous Year: Jan. 2009 - March 2012
35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% 2009 2010
2012
2011
2008 2010 2009
2011
2012
Data are based on originations, are not seasonally adjusted and exclude U.S. operations of CN and CP. Data prior to 2009 are not available. Source: AAR Weekly Railroad Traffic
CRUSHED STONE, SAND, AND GRAVEL

Average Weekly U.S. Rail Carloads of Crushed Stone, Sand, and Gravel
2006 (peak year)
% Change in U.S. Rail Carloads of Crushed Stone, Sand, and Gravel From Same Month Previous Year: Jan. 2006 - March 2012
35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35%
2011
2012
2010
2009
2006
2007
2008
2009
2010
2011
2012
MOTOR VEHICLES AND PARTS

Combined U.S. + Canadian Average Weekly Rail Carloads of Motor Vehicles*
28,000 25,000
2008
% Change in Combined U.S. + Canadian Rail Carloads of Motor Vehicles* From Same Month Previous Year: Jan. 2006 - March 2012
80% 60% 40% 20% 0%
22,000
2012
2011
19,000 16,000
2010
13,000 10,000 7,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
*Includes parts. Data are weekly average originations for each month, are not seasonally adjusted, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
-20% -40% -60% -80% 2006 2007 2008 2009 2010 2011 2012
2009
Page 17 of 40
METALLIC ORES (OVERWHELMINGLY IRON ORE)

Combined U.S. + Canadian Avg. Weekly Rail Carloads of Metallic Ores
26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000
% Change in Combined U.S. + Canadian Rail Carloads of Metallic Ores From Same Month Previous Year: Jan. 2006 - March 2012
220% 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% -60% -80%
2012
2011
2010 2008 2009
March 2012 was up 3.7% over March 2011 and down 0.3% from March 2010.
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
2006
2007
2008
2009
2010
2011
2012
Data are based on originations, are not seasonally adjusted, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic
LUMBER AND WOOD PRODUCTS + PRIMARY FOREST PRODUCTS

Combined U.S. + Canadian Average Weekly Rail Carloads of Lumber and Primary Forest Products
12,000 11,000 10,000
2012 2008 2011
% Change in Combined U.S. + Canadian Rail Carloads of Lumber and Primary Forest Products From Same Month Previous Year: Jan. 2006 - March 2012
30% 20% 10% 0% -10%
9,000 8,000 7,000

2009
2010
-20% -30%
-40%
2006
2007
2008
2009
2010
2011
2012
PULP AND PAPER PRODUCTS

Combined U.S. + Canadian Average Weekly Rail Carloads of Pulp and Paper Products
% Change in Combined U.S. + Canadian Rail Carloads of Pulp and Paper Products From Same Month Previous Year: Jan. 2006 - March 2012
15% 10%
2008
5% 0%
2011
2010
-5% -10% -15%

2009 2012
-20% -25% -30% 2006 2007 2008 2009
2010
2011
2012
Page 18 of 40
SEASONALLY ADJUSTED RA TRAFFIC S AIL C
Rail Time Indicators April 6, 2012 p
Page 19 of 40 9
SEASON NALLY ADJU USTED RAIL TRAFFIC, c L cont.
Where to go for more information o e n: Weekly AAR press releases on railroad traffic are ava W p s t ailable on the AAR web site here. For a e sa ample copy of an AAR We o eekly Railroad Traffic repor e-mail Pau Posey at pp d rt, ul posey@aar.or rg. Weekly Railroa Traffic is fr to AAR members and a W ad ree m available by s subscription to others.
Rail Time Indicators Ap 6, 2012 I pril
Page 20 of 40 0
GROSS DOMESTIC PRODUCT (GDP)

What is it and why is it important? GDP (the output of goods and services produced by labor and property in a country) measures the size of an economy and how fast its growing. Assuming its measured accurately, its probably the single most conclusive piece of information on the health of an economy. The GDP figure that gets all the press is the annualized percentage change in inflation-adjusted GDP from one quarter to the next. It is revised several times as better data % Change in U.S. GDP vs. Rail Traffic 20% become available. GDP and freight rail traffic have historically been closely correlated, although rail freight traffic tends to be more volatile than the economy as a whole, as the chart at right shows. The correlation isnt perfect, but it is strong and positive. The slight decline in rail volume in Q1 2012 is mainly due to coal and grain, carloads of which do not correlate well with overall economic growth.
16% 12% 8% 4% 0% -4% -8% -12% -16% -20% -24% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Percentages are year-over-year. Traffic = carloads + intermodal Source: BEA, AAR
bars = GDP line = rail traffic
What are the latest numbers?
According to the BEAs third estimate, released on March 29, U.S. GDP grew at an annualized rate of 3.0% in Q4 2011, a rate unchanged from the BEAs second estimate released at the end of February. Its the highest GDP growth since Q2 2010. The charts on the next page, which are updates of charts we last showed in November 2011, show the recent performance of various components of GDP: Personal consumption expenditures (top row of charts) have more than recovered their losses from the recession they were 2% higher in Q4 2011 than in Q1 2007, Quarterly Real U.S. GDP Growth: Q1 2005 Q4 2012 the start of the recession. The rate of (annualized % change from previous quarter) growth in consumption of goods has 6% outpaced the rate of growth in Actual 4% consumption of services, although in 2% absolute terms consumption of services far outpaces consumption of 0% goods.
-2%
Nonresidential fixed investment (middle left chart) is still far below prerecession levels. Corporations are sitting on huge piles of cash, but until they are confident that the return on new investments will be high enough to make the investment worthwhile, those investments wont be made.
Q4 2011: 3.0%
Forecast
-4% -6% -8% -10% 2005 2006 2007 2008 2009 2010 2011 2012
Source: Bureau of Economic Analysis, Wall Street Journal. Estimates for Q1 2012 to Q4 2012 are the consensus forecast by around 50 leading economists surveyed by The Wall Street Journal in March 2012.
Residential fixed investment think housing is still doing terribly (middle right chart). (See also the section on housing starts on page 37.) Government consumption in Q4 2011 was 1% higher than in Q4 2007 (bottom left), though the comparable figure for the federal government (+13%) was much different than the figure for state and local governments (-6%).
Page 21 of 40
Finally, exports (bottom right chart below) have been growing rapidly, but the rate of growth has slowed over the past couple of quarters.
Personal Consumption: Services
(billions of inflation-adjusted 2005 $, annualized) $6,300 $6,200 $6,100 $6,000 $5,900 $5,800 $5,700 $5,600 $5,500 2005 2006 2007 2008 2009 2010 2011
Source: Bureau of Economic Analysis - NIPA Table 1.1.6
Personal Consumption: Goods

(billions of inflation-adjusted 2005 $, annualized) $3,450 $3,400 $3,350 $3,300 $3,250 $3,200 $3,150 $3,100 $3,050 $3,000 $2,950 $2,900 2005 2006 2007
recession -7.0% = -$232 billion
2008
2009
2010
2011
Source: Bureau of Economic Analysis - NIPA Table 1.1.6
Nonresidential Fixed Investment*

(billions of inflation-adjusted 2005 $, annualized) $1,800 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 2005 2006 2007 2008 2009 2010 2011
*Equipment, software, structures, etc. with a useful life of more than one year. Source: Bureau of Economic Analysis - NIPA Table 1.1.6
Residential Fixed Investment*

(billions of inflation-adjusted 2005 $, annualized) $900
peak (6.2% of GDP) recession -36.1% = -$189 billion
$800 $700 $600 $500
2.5% of GDP
$400 $300 $200 2005 2006 2007 2008 2009 2010 2011
*Purchases of homes by households. Source: BEA - NIPA Table 1.1.6
Total Government Consumption*

(billions of inflation-adjusted 2005 $, annualized) $2,700 $2,650 $2,600 $2,550 $2,500 $2,450 $2,400 $2,350 $2,300 $2,250 $2,200 $2,150 2005 2006 2007 $1,900
recession
U.S. Exports of Goods and Services

(billions of inflation-adjusted 2005 $, annualized) $1,800 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200
recession -10.6% = -$173 billion*
2008
2009
2010
2011
$1,100 2005 2006 2007 2008 2009 2010 2011

*Goods = $153 billion. Source: BEA - NIPA Table 1.1.6
*Value of goods and services provided to the public such as defense and education, plus equipment, software, and structures to provide these services. Does not include government spending for social service programs or interest. Source: BEA - NIPA Table 1.1.6
Where to go for more information: The most recent BEA news release on GDP, including links to detailed data tables, is here. BEA will release its first of several estimates of Q1 2012 GDP growth on April 27.
Page 22 of 40
PURCHASING MANAGERS INDEX (PMI) and NON-MANUFACTURING INDEX (NMI)

What is it and why is it important? The PMI is released by the Institute for Supply Management (ISM) and combines data on new orders, inventory, production, supplier deliveries, and employment. It is based on a survey of several hundred supply managers at manufacturers throughout the country and is considered an indicator both of actual on-the-ground conditions as well as near- to medium-term sentiment. The NMI is like the PMI, except that it tracks services. Manufacturing accounts for around 12% of U.S. GDP not as much as it used to, but the U.S. is still the worlds top manufacturer. Much of what railroads haul, of course, consists of raw materials for manufacturing or finished manufactured goods. Services account for around twothirds of U.S. GDP and around 80% of private-sector employment. According to the ISM, a PMI > 50 indicates that overall manufacturing is generally expanding; a PMI < 50 indicates manufacturing is generally contracting. Likewise, an NMI < 50 indicates the services sector overall is contracting; an NMI > 50 indicates the service sector is expanding.
What are the latest numbers? The PMI rose to 53.4 in March 2012 from 52.4 in February 2012 (see the bars in the chart below left), comfortably above the threshold of 50 thought to indicate expansion in manufacturing. However, the new orders component of the PMI fell to 54.5 in March, down from 54.9 in February and its lowest level in five months (see the line in the chart below left). What the ISM said about the March PMI: "The PMI registered 53.4 percentindicating expansion in the manufacturing sector for the 32nd consecutive month. ..Of the 18 industries included in the survey, 15 are experiencing overall growth. Comments from the panel remain positive, with several respondents citing increased sales and demand for the next few months."
Purchasing Managers Index (PMI): Jan. 2007 - March 2012
70 65 60 55 50 45 40 35 30 25 20 2007 2008 2009 2010 2011 2012
Data are seasonally adjusted. Source: Institute for Supply Management
Non-Manufacturing Index (NMI): Jan. 2008 - March 2012

70 65
New orders component
New orders
60 55 50 45 40 35
Overall PMI (> 50 = manuf. is expanding) (< 50 = manuf. is contracting)
30 25 20 2008
Overall NMI (> 50 = non-manuf. is expanding) (< 50 = non-manuf. is contracting)
2009
2010
2011
2012
Data are seasonally adjusted. Source: Institute for Supply Management
Separately, the ISM reported that the NMI fell to 56.0 in March 2012 from 57.3 in February 2012 and 56.8 in January 2012 (see the chart above right). This index too is comfortably ahead of the 50 threshold indicating expansion of the service sector and remains higher than its been for most of the past year. In March, 16 of the 18 nonmanufacturing industries the ISM follows reported growth, up from 14 in February, 12 in January, and in 11 in December. The new orders component of the NMI fell to 58.8 in March from 61.2 in February (see the line in the chart above right), but it too remains significantly higher than where its been for most of the past year. What the ISM said about the March NMI: Respondents' comments remain mostly optimistic about business conditions. They indicate that increased discretionary spending reflects the
Page 23 of 40
increased confidence level of businesses and consumers. There is continued concern about cost pressures and the instability of fuel prices." The chart below left compares the PMI with rail traffic (defined here as carloads plus intermodal containers and trailers). For the past three years the correlation has not been close, with the PMI far outpacing rail traffic.1 (By contrast, the correlation between rail traffic and industrial production is very close see the chart on page 28.) The chart below right compares the NMI with rail traffic. The correlation there is weak too.2
NMI vs. U.S. Rail Traffic: Jan. 2008 - March 2012
(Jan. 2008 = 100)
135 130 125 120 115 110 105 100 95 90 85 80 75
2012
correlation = 39%
PMI vs. U.S. Rail Traffic: Jan. 2007 - March 2012

(Jan. 2007 = 100)
130 120 110 100 90 80 70 60 50 2007 2008 2009 2010 2011
*Carloads + intermodal units. Data are seasonally adjusted. Sources: ISM, AAR
Rail traffic*
Rail traffic* NMI
PMI
correlation = 18%
2008
2009
2010
2011
2012
Data are seasonally adjusted. *Carloads + intermodal units. Sources: ISM, AAR
Where to go for more information: The ISMs press release on the March PMI is here; Aprils PMI will be released May 1. The press release on the March NMI is here. Aprils NMI will be released on May 3.
MANUFACTURING INVENTORIES AND SALES

What is it and why is it important? Firms dont want to hold too much inventory because it costs money to store and it can become obsolete or spoil. Plus, inventory earns no return on investment. But firms dont want too little inventory either, or they could lose sales. Like Goldilocks, they want inventory thats just right. When sales fall, inventories must rise if production is kept at the same pace. Eventually, when inventories are too high, destocking occurs via production cuts. This leads to job losses, fewer raw material purchases, and other negative economy-wide effects. When sales rise, either inventories must fall, production must increase, or both. Eventually, inventories become too low and restocking occurs via production increases. This means more employment, more raw material purchases, and other positive economy-wide effects.
What are the latest numbers? Manufacturing sales rose just 0.1% ($327 million) in February 2012 over January 2012, the slowest rate of growth in six months (see top two charts on the left on the next page). Meanwhile, manufacturing inventories rose 0.4% ($2.2 billion) in February 2012 (see middle right chart on the next page). The resulting inventory-sales ratio for manufacturing rose 0.3% in February (see top right chart on the next page). The ratio has fluctuated within a narrow band for a couple of years.
This chart looks similar if different aggregations of rail traffic are used e.g., total carloads or total carloads excluding coal and grain. 2 Again, the chart looks basically the same if other measures of rail traffic are used.
Page 24 of 40
The gap between inventories and sales continued to trend upward in February 2012 (see the bottom left chart below). The gap is now higher than its been since May 2009. Maybe manufacturers are optimistic and are stocking up in anticipation of higher sales in the future, or maybe the gap is a bit higher than it should be.
Inventory-Sales Ratio for Manufacturing: Jan. 2007 - Feb. 2012
1.6
recession
Manufact. Sales & Inventories: Jan. 2007 - Feb. 2012

($ Billions)
$625 $600 $575 $550 $525 $500 $475 $450 $425 $400 $375 $350 $325 2007 2008 2009 2010 2011 2012
Data are seasonally-adjusted but not adjusted for inflation. Source: Census Bureau
recession
1.5
Feb. 2012 = 1.33, up 0.3% from Jan. 2012 Manufacturing inventories
1.4 1.3 1.2 1.1
Manufacturing sales
1.0 2007 2008 2009 2010 2011 2012

Data are seasonally-adjusted. Source: Census Bureau
% Change in Manufacturing Sales From Previous Month: Jan. 2007 - Feb. 2012
4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% -9% 2.0% 1.5% 1.0% 0.5% 0.0%
Feb. 2012: +0.1%
% Change in Manufacturing Inventories From Previous Month: Jan. 2007 - Feb. 2012
-0.5% -1.0% -1.5% -2.0% -2.5% -3.0% -3.5%

Feb. 2012: +0.4%
2007
2008
2009
2010
2011
2012
2007
2008
2009
2010
2011
2012
Gap Between Manufacturing Inventories and Manufacturing Sales: Jan. 2007 - Feb. 2012
($ Billions)
$200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2007 2008 2009 2010 2011 2012
Data are seasonally adjusted. Source: Census Bureau
recession
Inventory-Sales Ratio: Manufacturing vs. Retail vs. Wholesalers Jan. 2007 - Jan. 2012*
1.7 1.6
Retail
1.5
Manufacturing*
1.4 1.3 1.2 1.1 1.0 2007 2008 2009 2010 2011 2012
*Manufacturing is through Feb. 2012. Data are seasonally adjusted. Source: Census Bureau
Total
Wholesalers
Page 25 of 40
The chart at the bottom right of the previous page, which we include every few months, shows that the inventory-sales ratio for manufacturing is now higher than it was in 2007 and 2008; the inventory-sales ratios for merchant wholesalers and for business as a whole are about the same now as they were then; and the inventory-sales ratio for retailers remains well below where it was. All of them have been relatively steady for a while. The four charts below compare the manufacturing inventory-sales ratio overall and for several key manufacturing sectors with rail traffic one month later. For overall traffic (defined here as carloads excluding coal and grain), chemicals, and primary metal products (mainly steel), the correlation is strong and negative. For paper products, the correlation is much weaker, possibly because of the inclusion of rail paper shipments from Canada, which is a key supplier to the U.S. paper market, and possibly because the U.S. paper industry has still not recovered much from the losses incurred during the recession.
Inventory-Sales Ratio for Chemicals vs. Rail Carloads of Chemicals One Month Later*
(Index Jan. 2007 = 100)
130 120
Mfr. inventory-sales ratio Inventory-sales ratio
Manufact. Inventory-Sales Ratio vs. U.S. Rail Traffic* One Month Later: Jan. 2007 - Feb. 2012**
(Index Jan. 2007 = 100)
130 120 110 100 90 80 70 60 2007 2008 2009 2010 2011 2012
*Carloads excluding coal and grain **January inventory-sales ratio vs. February rail traffic, and so on. Data are seasonally adjusted. Sources: Census Bureau, AAR
110 100 90
Rail traffic*
80
correlation = -93% Rail traffic*
70 60
correlation = -89%
2007
2008
2009
2010
2011
2012
*January inventory-sales ratio vs. February rail traffic, and so on. Data are seasonally adjusted. Sources: Census Bureau, AAR
Inventory-Sales Ratio for Primary Metal Products vs. Rail Carloads of Primary Metal Prod. One Month Later*
(Index Jan. 2007 = 100)
160 140 120
Inventory-sales ratio
Inventory-Sales Ratio for Paper Products vs. Rail Carloads of Paper Products One Month Later*
(Index Jan. 2007 = 100)
130 120 110 100 90 80 70
Inventory-sales ratio
100 80 60 40 20 2007 2008 2009 2010 2011 2012

*January inventory-sales ratio vs. February rail traffic, and so on. Data are seasonally adjusted. Sources: Census Bureau, AAR
correlation = -78%
Rail traffic*
60 50 40
Rail traffic* correlation = 21%
2007
2008
2009
2010
2011
2012
Data are seasonally adjusted. *Carloads include Canadian carloads because Canada supplies much of U.S. paper consumption. Sources: Census Bureau, AAR
Where to go for more information: The Census Bureaus report on manufacturing sales and inventories in February is here. March 2012 data will be released on May 3, 2012.
Page 26 of 40
INDUSTRIAL PRODUCTION
What is it and why is it important? 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. Data are obtained by the Federal Reserve from a variety of government and industry sources. Manufacturing accounts for about 75% of industrial production; utility and mine output are key components as well.
What are the latest numbers? Total U.S. industrial production was flat in February 2012 compared with January 2012 (see top row of charts below). Revised figures show industrial production in January 2012 rose 0.5% after originally being reported as unchanged.3
Overall U.S. Industrial Production: % Change From Previous Month Jan. 2007 - Feb. 2012
2%
Feb. 2012 = 95.5% of peak
U.S. Industrial Production: Jan. 2007 - Feb. 2012

(Index Jan. 2007 = 100)
110
Dec. 2007 = all-time peak
105 100 95 90 85 80 75 2007 2008 2009 2010 2011 2012

Data are seasonally adjusted. Source: Federal Reserve
1% 0%
June 2009 = 82.9% of peak
-1%
Jan. 2012 to Feb. 2012: +0.0%
-2% -3%
hurricanes
-4% -5% 2007 2008 2009 2010 2011 2012

U.S. Manufacturing Output: Jan. 2007 - Feb. 2012

(Index Jan. 2007 = 100)
110
Dec. 2007 = all-time peak
Manufacturing % Change From Previous Month: Jan. 2007 - Feb. 2012

2% 1% 0%
105
Feb. 2012 = 94.2% of peak
100 95 90 85 80 75 2007 2008 2009 2010 2011 2012

Data are seasonally adjusted. Source: Federal Reserve Feb. 2012: +0.4%
June 2009 = 79.2% of peak
-1% -2% -3% -4% 2007 2008 2009 2010 2011 2012
The manufacturing component of industrial production rose 0.4% in February, its third consecutive increase (see bottom row of charts above) but a much smaller increase than in January 2012 (1.2%) or December 2011 (1.5%). Manufacturing output excluding high technology and manufacturing output excluding motor vehicles both rose 0.4% in February. The chart at the top of the next page shows industrial production over the past year for several key manufacturing and industrial sectors. Output of motor vehicles and parts rose 0.3% in February 2012.
In late March 2012, the Federal Reserve released its annual comprehensive revision to industrial production and capacity utilization, resulting in updates going back many years.
Page 27 of 40
U.S. Industrial Production: March 2011 - Feb. 2012

(Dec. 2007 = 100)
120 115 110 105 100 95 90 85 80 75 70 65 60 55
Where each sector was at start of recession
Feb. 2012: +0.0% Total IP
Feb. 2012: +0.4% Total mfg.
Feb. 2012: -0.1% Utilities
Feb. 2012: -3.0% Iron & steel
Feb. 2012: -0.7% Wood products
Feb. 2012: +0.3% Motor vehicles
Feb. 2012: +1.0% Paper
Feb. 2012: -0.8% Chemicals
Feb. 2012: +0.5% RR rolling stock
% shown is the change from the previous month. Data are seasonally adjusted. Source: Federal Reserve
In February, as in other recent months, total industrial output was brought down by declines in utility and mining output. Gas and electric utility output in February fell for the third straight month and sixth month of the past seven (see utilities bars in the chart above). Mining output fell too in February. Coal output fell 7.5% in February, its biggest month-to-month decline since August 1993. The mining sector also includes natural gas and crude petroleum extraction, which declined in February for the second straight month, according to Fed data. The chart below left compares the manufacturing component of the Feds industrial production index with the Institute for Supply Managements Purchasing Managers Index (see page 23). They tracked each other pretty well in 2007 and the first half of 2008 before diverging significantly, with the PMI far outpacing the Feds index of manufacturing output. The gap today isnt as wide as it was in late 2009 through mid-2011. The chart below right shows the close correlation between the Feds index of manufacturing output and rail traffic (here defined as carloads excluding coal and grain). On page 24 we show that there is no longer a close correlation between rail traffic and the PMI.
Federal Reserve's Manufacturing Index vs. ISM's Purchasing Managers Index U.S. Manufacturing Output vs. U.S. Rail Carloads Excluding Coal and Grain
110
recession
130 125 120 115 110 105 100 95 90 85 80 75 70 65 60
(Index Jan. 2007 = 100)
200,000 180,000
Rail carloads (right scale)
105
ISM's Purchasing Managers Index
100 95 90 85 80
Manufacturing output according to Federal Reserve Manufacturing output (left scale, Jan. 2007=100)
correlation = 97%
160,000 140,000 120,000 100,000 80,000 60,000 40,000 2007 2008 2009 2010 2011 2012
Data are seasonally adjusted. Source: Federal Reserve, AAR
correlation = 9%
75 70
2007
2008
2009
2010
2011
2012
Data are seasonally adjusted. Source: Institute for Supply Management, Federal Reserve
Where to go for more information: The Federal Reserve release on industrial production in February 2012 is here. March 2012 data will be released April 17.
Page 28 of 40
CAPACITY UTILIZATION
What is it and why is it important? 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. 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 portend price increases or supply shortages in the near future. The farther below this level, the more slack there is in the economy or particular sector. Firms everywhere walk a tightrope when it comes to capacity. If they take too long to bring back idled capacity or build new capacity, they risk shortages and lost sales. Or, they could face higher costs in other areas (e.g., higher overtime costs). On the other hand, adding capacity that ends up not being used adds costs with no offsetting returns.
U.S. Capacity Utilization: Jan. 2007 - Feb. 2012
84% 82% 80% 78% 76% 74% 72% 70% 68% 66%
Overall Manufacturing
recession
What are the latest numbers? Overall U.S. capacity utilization was flat in February 2012 compared with January 2012 at 78.4%, while capacity utilization for manufacturing rose to 78.2% in February from 77.9% in January its highest level since December 2007 when the recent recession began. (Of course, total capacity in many industries is lower now than it was before the recession.)
64% Note that the capacity utilization rate for manufacturing is now nearly as high 62% 2008 2009 2010 2007 as the overall capacity utilization rate. Data are seasonally adjusted. Source: Federal Reserve The difference 0.2 percentage points is closer than its been since at least some time before 1986, when the Feds comparable records begin.
2011
2012
% Point Change in Total U.S. Capacity Utilization From Previous Month: Jan. 2007 - Feb. 2012
1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5%
hurricanes
% Point Change in Capacity Utilization For Manufacturing From Prev. Month: Jan. 2007 - Feb. 2012
1.5% 1.0% 0.5% 0.0%
Feb. 2012: +0.0 percentage points
-0.5% -1.0% -1.5% -2.0% -2.5%

Feb. 2012: +0.2 percentage points
-3.0% -3.5% 2007 2008 2009 2010 2011 2012

-3.0% 2007 2008 2009 2010 2011 2012

The chart at the top of the next page shows capacity utilization for a number of major industrial sectors. Note the big declines in capacity utilization in recent months for utilities and coal mining.
Page 29 of 40
Those declines are whats driving the convergence of overall capacity utilization and capacity utilization for manufacturing mentioned above.
Capacity Utilization: March 2011 - Feb. 2012

90% 85% 80% 75% 70% 65% 60% 55% 50% Total IP Total mfg. Chemicals Motor vehicles Iron & steel Paper Wood products Utilities Coal mining
Feb. 2012: -0.0% Feb. 2012: +0.2% Feb. 2012: -0.7% Feb. 2012: -0.9% Feb. 2012: -2.7% Feb. 2012: +0.7% Feb. 2012: +0.2% Feb. 2012: -0.1% Feb. 2012: -5.6%
Note: Data are percentage point changes from prior month. Data are seasonally adjusted. Source: Federal Reserve
Overall Capacity Utilization vs. Total U.S. Rail Traffic* Jan. 2007 - Feb. 2012
85% 80% 75% 70% 65%
correlation = 96% Capacity utilization* (left scale)
recession
Manufacturing Capacity Utilization vs. U.S. Rail Carloads Excl. Coal and Grain: Jan. 2007 - Feb. 2012*
84% 82% 80% 78% 76% 74% 72% 70% 68% 66% 64% 62%
recession
600,000 560,000 520,000 480,000 440,000 400,000
Rail traffic* (right scale)
Carloads excluding coal and grain** (right scale)
Capacity utilization for manufacturing* (left scale)
correlation = 92%
60% 2007 2008 2009 2010 2011 2012

*Carloads + intermodal units, weekly average per month. Data are for U.S. and are seasonally adjusted. Source: Federal Reserve, AAR
190,000 180,000 170,000 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000
2007
2008
2009
2010
2011
2012
*Capacity utilization is through February 2012. **Weekly average per month. Data are for the U.S. and are seasonally adjusted. Source: Federal Reserve, AAR
Where to go for more information: The Federal Reserve release on capacity utilization in February 2012 is here. March 2012 data will be released on April 17.
NUMBER OF EMPLOYED PERSONS AND UNEMPLOYMENT RATE

What is it and why is it important? Released by the U.S. Bureau of Labor Statistics, the figures provide a snapshot of the strength of the U.S. labor market. Because of their visibility and political importance, they are probably the single most anticipated and widely publicized economic indicators in the world. They are based on two separate surveys: 1) an establishment survey that uses payroll data from around 486,000 businesses, and 2) a household survey of around 55,000 households. The net number of jobs gained or lost in a given month and employment by industry figures come from the survey of businesses. The unemployment rate, the size of the labor force, and the labor force participation rate, among others, come from the household survey. The two
Page 30 of 40
surveys sometimes produce puzzling results. For example, in the same month there can be a sharp drop in the unemployment rate (household survey) without many new jobs created (establishment survey). In the United States, a gain of 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 157,000 jobs.) Job growth of 100,000-120,000 is needed just to keep up with the typical growth in the labor force from one month to the next. Employment is often considered a lagging indicator because employers often decide to wait until theyre sure an economic recovery is here to stay before making new permanent hires. In the meantime, they might rely on more hours for existing workers or on temporary workers. 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).
What are the latest numbers? In March 2012, 120,000 net new jobs were created, down from a revised 240,000 in February 2012 and 275,000 in January 2012 (see the chart below left). This was a disappointingly low number, much lower than most economists expected. In March, total private sector jobs grew by 121,000 and total government jobs fell by 1,000. Industries with job gains included leisure and hospitality (mainly hotels, bars and restaurants, +39,000), manufacturing (+37,000), health care (+26,000), and financial activities (+15,000). Industries seeing job losses in March included retail sales (-34,000), temporaries (-8,000) and construction (-7,000).
Change in U.S. Non-Farm Employment: Jan. 2007 - March 2012*
600 500 400 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 -800 -900
Red dots are roughly where bars would be if census-related employment were excluded.
U.S. Unemployment Rate: Jan. 2007 - March 2012*

12% 11% 10% 9% 8%
The official U.S. unemployment rate fell to 8.2% in March 2012, down from 8.3% in February. Women Men
000s
March 2012: +120,000
7% 6% 5% 4%
2007: +1.1 million 2008: -3.6 million 2009: -5.1 million 2010: +1.0 million 2011: +1.8 million 2007 2008 2009 2010 2011 2012
Overall
3%
2007
2008
2009
2010
2011
2012
*Change from previous month. Figures are seasonally adjusted. Source: BLS
*Civilian labor force, seasonally adjusted. Source: Bureau of Labor Statistics
Meanwhile, the official unemployment rate fell to 8.2% in March 2012, down from 8.3% in February 2012 and its lowest level since January 2009. One reason for the lower unemployment rate in light of the relatively small jobs growth is that the size of the labor force (the denominator in the unemployment rate equation) fell by 164,000 in March, following two months of solid increases. The size of the labor force can be extremely volatile from one month to the next. The number of initial unemployment claims averaged 364,000 in March 2012, well below the 400,000 threshold that is generally considered to be a sign of a reasonably healthy labor market and nearly 300,000 fewer than we saw three years ago (see chart at the top left of the next page). Less cheery is the chart on the top right of the next page, which shows the number of employed persons as a percentage of the working age population. From January 2000 through December 2007, it averaged 63.0%. The percentage then fell sharply through the end of 2009, and it hasnt budged much since. In March 2012, it was just 58.5%, representing a tremendous loss of potentially productive human capital from the economy.
Page 31 of 40
Weekly Initial Unemployment Claims: Jan. 2007 - March 2012

700,000 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 2007 2008 2009 2010 2011 2012
Figures are 4-week moving averages. Source: U.S. Department of Labor
Employed Persons as % of Population: Jan. 2007 - March 2012

64% 63% 62% 61% 60%
March 2012 = 58.5%
400,000 is generally considered the threshold below which the economy is thought to be adding jobs at a decent pace.
59% 58% 57% 56% 2007 2008 2009 2010 2011 2012
Data are not seasonally adjusted. Source: U.S. Bureau of Labor Statistics
When an increasing number of people quit their jobs, its usually a sign of confidence in the job market. We seem to be seeing that today. The chart below left shows the number of voluntary job leavers in recent years. Theres some noise in the figures, but generally speaking the number of people who have voluntarily left their previous job has increased in recent months. The chart below right shows voluntary job leavers as a percentage of total unemployed, and this metric shows the trend even more clearly. At 8.7% in March 2012, job leavers as a percentage of the unemployed is the highest its been since December 2008.
Voluntary "Job Leavers" as a % of the Unemployed: Jan. 2007 - March 2012
13% 12% 11%
Voluntary "Job Leavers": Jan. 2007 - March 2012

(000s)
1,200 1,100 1,000 900 800 700 600 500 2007 2008 2009 2010 2011 2012
Data are seasonally adjusted 3-month moving averages. Source: Bureau of Labor Statistics
10% 9% 8% 7% 6% 5% 4% 3% 2007 2008 2009 2010 2011 2012

Data are seasonally adjusted. Source: Bureau of Labor Statistics
March 2012 = 8.7%
Temporary employment is often considered to be a leading indicator of broader growth in the economy and in higher permanent employment. The chart on the top left of the next page shows this appears to be true an increase in temporary employees seems to precede by a few months a lower overall unemployment rate. The number of temporary workers has been increasing lately (a downward sloping line in the chart indicates higher temporary employment), notwithstanding the small decline in March 2012. Finally, the chart on the top right of the next page shows average weekly hours for private sector employees. After falling sharply in 2008 and plateauing in 2009, theyve risen slowly since then and are now not that far from where they were when the recession began. The big challenge, of course, is to get more workers back to work, not just increase the hours of existing workers. Still, longer hours for existing workers is a good sign, and the hope is that the decline in March is an aberration rather than the start of a trend.
Page 32 of 40
Unemployment Rate vs. Temporary Employment: Jan. 2007 - March 2012*

12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2007 2008 2009 2010 2011 2012
Unemployment rate (left scale) Temporary employees (millions, right scale)
Average Weekly Hours: Jan. 2007 - March 2012

35.0 34.8 34.6
recession
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2
34.4 34.2 34.0 33.8 33.6 33.4 33.2 33.0 2007 2008 2009 2010 2011 2012
Data are for all private sector employees. Source: U.S. Bureau of Labor Statistics
*Civilian labor force, seasonally adjusted. Source: Bureau of Labor Statistics
Where to go for more information: The March 2012 BLS employment report is here. Data for April 2012 will be released on May 4.
CLASS I FREIGHT RAILROAD EMPLOYMENT

What is it and why is it important? The data show the average number of U.S. Class I freight railroad employees at mid-month. As in other industries, employment in the rail industry is largely a function of the level of business (see chart below right), although there is also some seasonality to it.
What are the latest numbers? Class I employment fell to 159,228 in February 2012, a decline of 105 employees from January 2012 (see chart below left). Total Class I employment was 4,726 employees higher (3.1%) in February 2012 than in February 2011.
Railroad Employees* vs. Rail Traffic**
175,000
Jan. 2012 to Feb. 2012: -105
correlation = 93%
Class I Railroad Employment: Jan. 2005 - Feb. 2012

170,000 165,000 160,000 155,000 150,000 145,000 140,000 135,000 2005 2006 2007 2008 2009 2010 2011 2012
Beginning in January 2010, the bars in this chart are around 1,000 employees higher than in previous months due to the inclusion of employees from two large railroads acquired by a Class I railroad. Data are non-seasonally adjusted. Source: STB
600,000 575,000
Rail traffic** (right scale)
170,000 165,000 160,000 155,000 150,000 145,000 140,000 135,000 2007 2008 2009 2010 2011 2012
RR employees* (left scale)
550,000 525,000 500,000 475,000 450,000 425,000 400,000
**6-month moving average carloads + intermodal units . Source: STB (employment), AAR (traffic)
In February 2012, most major classes of rail employees saw declines from the month before. The one exception was train and engine employees (mainly engineers and conductors who operate trains), whose employment rose by 170 in February 2012 over January 2012.
Where to go for more information: The STB web site for railroad employment data is here.
Page 33 of 40
CONSUMER CONFIDENCE
What is it and why is it important? The index, released by the Conference Board on the last Tuesday of the month, is based on surveys received from about 3,000 U.S. households. It is designed to gauge the financial health, spending power, and confidence of the average U.S. consumer. Respondents are asked about current conditions and their expectations for the next six months. The index is designed to predict future consumer spending, on the theory that the more confident consumers are about their job prospects, income, etc., the more likely they are to make purchases, especially big-ticket items. As David Wyss (the chief economist at Standard & Poors) has said, A confident consumer buys a new car. A cautious consumer repairs the old one. Consumers psyches are most heavily influenced by economic factors, such as gas prices, the unemployment rate, and how much money they have to spend, but non-economic factors such as terrorist attacks, a military victory, or even a good performance at an international sporting event can come into play too. Because there is always going to be some noise and monthto-month volatility in consumer confidence, trends are more important than a single data point.
Index of Consumer Confidence: Jan. 2007 - March 2012
(Index 1985 = 100)
120 110 100 90 80 70 60 50 40 30 20 10 0 2007
recession
What are the latest numbers? Consumer confidence fell to 70.2 in March 2012, down from 71.6 in February 2012. This decline comes after a sharp increase in February (see chart at right). What the Conference Board said about the March index: The moderate decline was due solely to a less favorable short-term outlook, while consumers assessment of current conditions, on the other hand, continued to improve [D]espite this months dip in confidence, consumers feel the economy is not losing momentum.
2008
2009
2010
2011
2012
Source: Conference Board
The Thomson Reuters/University of Michigans index of consumer sentiment is another popular survey of consumer confidence. As the chart below left shows, it generally mimics the Conference Board index, but they arent exactly the same. The Reuters/Univ. of Michigan index rose for the seventh straight month in March, reaching its highest point since February 2011.
Consumer Confidence: Conference Board vs. Thomson Reuters/Univ. of Michigan
(Index Jan. 2007 = 100)
Small Business Optimism Index: Jan. 2007 - Feb. 2012

(Index 1986 = 100)
100
recession
120 110 100 90 80 70 60 50 40 30 20 10 0
Thomson Reuters/ Univ. of Michigan
95
90
85
Conference Board
correlation = 86%
80 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Source: Conference Board, Thomson Reuters/Univ. of Michigan Source: National Federation of Independent Business
Page 34 of 40
A less well known, but still useful, survey of sentiment is the Small Business Optimism Index from the National Federation of Independent Business (NFIB). The NFIB index rose in February for the sixth consecutive month (see chart on the bottom right of the previous page). What the NFIB said about the February index: The price of gasoline is a wild card, and rising energy costs will weigh heavy on the minds of small firm owners. The economy is holding on to tenuous gains, moving ahead in fits and starts which, hopefully, will result in future positive growth.
Where to go for more information: The Conference Boards press release on Marchs consumer confidence index is here. Aprils consumer confidence index will be released on April 24. The next NFIB small business optimism index comes out April 10 see here.
RETAIL SALES
What is it and why is it important? The Census Bureau surveys 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 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 people buy.
What are the latest numbers? Total retail sales rose 1.1% ($4.3 billion) in February 2012 over January 2012, the biggest month-to-month percentage increase in five months.
Total Retail Sales: Jan. 2007 - Feb. 2012
($ billions)
$420 $410 $400 $390 $380 $370 $360 $350 $340 $330 $320 $310 2007 2008 2009 2010 2011 2012
Data are seasonally adjusted but are not adjusted for inflation. Source: Census Bureau
recession
% Change in Total Retail Sales from Previous Month: Jan. 2007 - Feb. 2012
4.0% 3.0% 2.0% 1.0% 0.0% -1.0%
Up 1.1% in Feb. 2012
$407.8 billion in Feb. 2012
-2.0% -3.0% -4.0% 2007 2008 2009 2010 2011 2012

Data are seasonally adjusted but are not adjusted for inflation. Source: Census Bureau
Given the recent increases in the price of gasoline, its not a surprise that retail sales at gasoline stations were up sharply (3.3%, $1.5 billion) in February 2012 over January 2012. In February, gasoline stations accounted for 11.5% of total retail sales, which is the highest percentage for any February on record (data begin in 1992). Excluding gasoline, retail sales were up 0.8% ($2.8 billion) in February. Categories seeing some of the largest percentage increases for the month included motor vehicles and parts (up 1.6%, or $1.1 billion), clothing and accessories (up 1.8%, or $341 million), and building and garden supplies (up 1.4%, or $385 million).
Where to go for more information: The Census Bureaus press release covering February 2012 retail sales is here. March 2012 retail sales will be released on April 16.
Page 35 of 40
NEW LIGHT VEHICLE SALES

What is it and why is it important? Data cover U.S. sales of cars and light trucks, including pickups and SUVs. Over the past 50 years, spending on motor vehicles has accounted, on average, for about 3.7% of U.S. GDP. Monthly auto sales are often referred to in terms of seasonally-adjusted annualized rates (SAAR). In 2011, 6% of U.S. Class I railroad gross revenue came from hauling autos and auto parts.
What are the latest numbers? New light vehicle sales fell to an annualized 14.3 million in February 2012, down from 15.0 million in February 2012. Despite the decline, auto sales in March were still much higher than theyve been almost every month over the past three years (see chart below left). Analysts chalk up the higher sales to pent-up demand, better employment prospects, warm weather that brings more people to showrooms, and purchases of Japanese cars that were delayed due to supply problems that have since been resolved.
% Change in U.S. Light Vehicle Sales From Previous Month: Jan. 2007 - March 2012
30%
14.3 million in March 2012 "Cash For Clunkers"
New U.S. Light Vehicle Sales: Jan. 2007 - March 2012*

(Seasonally-Adjusted Annualized Rate in Millions)
18 17 16 15 14 13 12 11 10 9 8 7 6 2007
20% 10% 0% -10% -20% -30% -40%
2008
2009
2010
2011
2012
2007
2008
2009
2010
2011
2012
*Data include passenger cars, SUVs, minivans, and pickups. Source: BEA
Data are seasonally adjusted. Source: BEA
U.S. Light Vehicle Sales vs. U.S. + Canadian Rail Carloads of Motor Vehicles & Equipment
18
recession
U.S. New Light Vehicle Sales vs. Rail Carloads of Autos and Auto Parts: Jan. 2007 - March 2012
30,000 28,000 26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000
Trend line
32,000 28,000
"Cash For Clunkers"
16 14 12 10 8 6 4 2 2007 2008
Bars = vehicle sales* (left scale) Line = rail carloads (right scale)
correlation = 91%
24,000 20,000 16,000 12,000 8,000 4,000 0 2010 2011 2012
Rail carloads*
2009
8 9 10 11 12 13 14 15 16 17 18 19 Motor vehicle sales (seasonally adjusted annual rates, millions)

*U.S. + Canada weekly avg. Data are seasonally adjusted. Source: AAR, BEA
*Passenger cars, SUVs, minivans, and pickups in millions at seasonally adjusted annual rates. Rail carloads are seasonally adjusted weekly averages per month. Source: AAR, BEA
The two charts directly above show the same information in two different ways. Both show the very close positive correlation between motor vehicle sales and rail carloads of motor vehicles and motor vehicle parts, and both illustrate the derived demand character of freight railroading.
Where to go for more information: BEA data on auto sales are here.
Page 36 of 40
HOUSING STARTS
What is it and why is it important? A housing start is beginning the foundation of a residential home. Historically, housing has directly accounted 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. Since January 2006, single family homes have accounted for 79% of housing starts and multifamily buildings 21%. Housing starts, especially for multi-family buildings, often fluctuate considerably from month to month, so trends are more important than a particular point in time. In the past, housing starts have usually been considered a leading indicator because construction growth usually picks up at the beginning of a business cycle. However, factors in todays housing market including a huge oversupply of existing houses due to slow sales and widespread foreclosures means new construction is a big drag on the economy today.
What are the latest numbers? Seasonally adjusted housing starts fell to 698,000 in February 2012 from a revised 706,000 in January 2012 (see chart below left). February 2012 was 34.7% higher than February 2011 (see chart below right).
U.S. Housing Starts: Jan. 2007 - Feb. 2012
(Seasonally-Adjusted Annualized Rate, 000s)
1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2007 2008 2009 2010 2011 2012
Source: Census Bureau
% Change in U.S. Housing Starts From the Same Month Previous Year: Jan. 2007 - Feb. 2012
50% 40% 30% 20% 10%
About what a healthy housing market would be
Total Single-family units Multi-family units
0% -10% -20% -30% -40% -50% -60% 2007 2008 2009 2010 2011 2012
Feb. 2012: +34.7%
% Change From Previous Month in U.S. Housing Starts: Jan. 2007 - Feb. 2012
25% 20% 15% 10% 5% 0% -5% -10% -15% -20% 2007 2008 2009 2010 2011 2012
% Change From Previous Month in U.S. Housing Starts: Jan. 2007 - Feb. 2012*
8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% -16% 2007 2008 2009 2010 2011
Feb. 2012: -0.2%
Feb. 2012: -1.1%
2012
*Based on 3-month moving average housing starts. Source: Census Bureau
Page 37 of 40
The chart on the bottom left of the previous page shows the percentage change in housing starts from the month before, including the 1.1% decline in February 2012 from January 2012. Note the frequent big swings, in both directions, from one month to the next, which can make housing starts tricky to analyze. The chart on the bottom right of the previous page also shows month-to-month percentage changes, but it is based on three-month average housing starts to temper some of the month-tomonth variability. Based on the three-month average, housing starts in February 2012 were down just 0.2% from January 2012, but it was the first decline in nine months (since April 2011), an indication that recent improvements in the housing market, which werent great to begin with, may be cooling.
The chart below left is a variation of a chart we last showed in November 2011. It shows that, after rising every month for many years, U.S. housing prices peaked in April 2006, were relatively flat for about a year, then fell every month for two years. From mid-2009 through mid-2010, average prices rose slightly, but theyve been trending down again since then. In other words, housing prices still may not have hit bottom, 5 years after their peak, and are now about where they were in early 2003 thats about a 34% average decline since 2006. The fact that its not clear if weve hit bottom adds yet another element of uncertainty to a housing market that is uncertain in many other ways as well. Of course, homeowners looking to sell arent pleased with falling home prices, but falling prices make purchasing a home more attractive to more people, at least in theory. As the National Association of Realtors recently said, For buyers who qualify and are ready to assume the responsibilities of owning a home, opportunity is knocking.
Average U.S. Home Prices: Jan. 2002 - Jan. 2012* (Index Q1 2000 = 100)
220 200 180 160 140 120 100 80 60 40 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
*20-city composite, adjusted for inflation. Source: S&P/Case-Shiller
Housing Starts vs. Rail Carloads of Lumber, Wood & Forest Products: Jan. 2007 - Feb. 2012
14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 400 550 700 850 1,000 1,150 1,300 1,450 1,600 Housing starts (seasonally adjusted annual rates, 000s)
Trend line
34% decline
Each month we include a chart showing the very close correlation between housing starts and rail carloads of lumber and wood products. This time were showing the data as a scatter diagram the close correlation is manifest in the near-linear relationship. Seasonally adjusted weekly rail carloads of lumber, wood, and primary forest products averaged 8,795 in March 2012, suggesting (but not guaranteeing) that housing starts were at least, and maybe somewhat more than, 700,000 on an annualized basis in March. March housing starts data will be released on April 17. According to the National Association of Realtors, The age of first-time home buyers fluctuates with household affordability. From 2003 to 2006, during the housing boom, younger buyers had a more difficult time entering the market and the typical age rose to 32. In 2007, the typical age of first-time home buyers fell to 31 and from 2008 to 2010 the typical age has remained at 30. Some analysts think this age could rise in the years ahead for a number of reasons, including a much-higher than normal unemployment rate for younger people and other financial obligations they face. For example, according to recent research from the Federal Reserve Bank of New York, The outstanding student loan balance now stands at about $870 billion, surpassing the
Rail carloads*
*U.S. + Canada weekly avg. Data are seasonally adjusted. Source: AAR, Census Bureau
Page 38 of 40
total credit card balance ($693 billion) and the total auto loan balance ($730 billion). With college enrollments increasing and the costs of attendance rising, this balance is expected to continue its upward trend. According to the bank, $580 billion of the total $870 billion in student loan debt is owed by people younger than 40. Obviously, if ex-students are facing huge student loan bills and uncertain employment prospects, buying a home could take a back seat and housing starts and the housing sector in general would clearly be affected. Where to go for more information: The Census Bureaus press release on housing starts in February 2012 is here. The Federal Reserve Bank of New York study on student loan debt is here.
CONSUMER PRICE INDEX (CPI)

What is it and why is it important? The CPI is the benchmark inflation guide for the U.S. economy. It measures the changes in the cost of a representative basket of consumer goods and services. The BLS collects prices from more than 20,000 retail and service establishments throughout the country. The CPI for All Urban Consumers (CPI-U) is the inflation index most often reported by the media, although BLS publishes thousands of CPI indexes each month. The core CPI defined as CPI less food and energy is also commonly used. Food and energy comprise a major part of the budget for most households, but their prices tend to go up and down dramatically or often, and a large price change for those items in one period doesnt necessarily tend to be followed by another large change in the same direction in the following period. Thus, its thought that leaving them out can be useful in assessing broader inflation trends. Its hard not to have at least a little inflation when an economy is growing, but inflation can harm economies in many ways. Just one example: inflation confuses price signals producers dont know if higher prices are simply part of an inflation-related adjustment or if they signal higher demand that warrants expanded production. The Federal Reserve regards inflation of 2% to be about right for the U.S. economy.
What are the latest numbers? The overall CPI was up 0.4% in Feb. 2012, while core CPI rose 0.1% for the month (see chart below left). Gasoline accounted for more than 80% of the increase in the overall CPI in February. For the year ending February 2012, the overall CPI was up 2.9% and included a 3.9% increase in the food index and a 7.0% increase in the total energy index. Core CPI excludes food and energy and was up 2.2% for the year ending February 2012 (see chart below right).
Year-Over-Year Change in the Consumer Price Index: Jan. 2007 - Feb. 2012*
6%
CPI excluding food and energy was up 0.1% in Feb. 2012.
Month-to-Month Change in the Consumer Price Index: Jan. 2007 - Feb. 2012*
1.2% 0.8% 0.4% 0.0% -0.4% -0.8% -1.2% -1.6% -2.0% 2007 2008 2009 2010 2011 2012
*Urban consumers, U.S. city avg. seasonally adjusted. Source: Bureau of Labor Statistics
5% 4% 3% 2%
Up 2.9% in the year ending Feb. 2012.
The overall CPI was up 0.4% in Feb. 2012. Bars = overall Line = excluding food and energy
1% 0% -1% -2% -3% 2007 2008 2009 2010 2011 2012

*Urban consumers, U.S. city average. Source: Bureau of Labor Statistics
Bars = overall Line = excluding food and energy
Up 2.2% in the year ending Feb. 2012.
Page 39 of 40
Where to go for more information: The BLS press release on the Feb. 2012 CPI is here; the March CPI will be released on April 17.
RAIL FREIGHT CARS IN STORAGE

What is it and why is it important? A freight car is in storage if it has had a loaded revenue move since 2005, but not in the past 60 days. Rail cars are stored when they are not needed due to lack of demand; they come out of storage when demand improves. Figures are for the entire North American rail freight car fleet and include rail cars owned by railroads, leasing companies, shippers, and others. The total freight car fleet changes from month to month as new cars are added and old cars are scrapped. There is a great deal of complexity in freight car usage patterns. For example, increases in demand for rail service for a particular commodity relative to another mean that some car types might be in very short supply at the same time that others are plentiful; a freight car might go through cycles where it is stored for a few months and then returned to service for a few months; and changes in scrap prices might make scrapping cars more attractive at one time than another.
What are the latest numbers? As of April 1, 2012, 299,324 freight cars were in storage, an increase of 9,819 from March 1, 2012, and equal to 19.6% of the North American fleet, excluding cars without a load since before 2005 (see charts below). In July 2009, 1.603 million cars were in the fleet, including cars without a load since before 2005. From July 2009 to March 2012, 77,221 new cars were installed and 142,190 cars were scrapped or otherwise removed yielding a net reduction of 64,969 cars in the North American fleet. 527,060 cars were in storage on July 1, 2009 (including cars that last moved loaded prior to 2005). By April 1, 2012, that was down to 310,064, for a reduction of 216,996. Subtracting the 142,190 cars scrapped or otherwise removed yields a net of 74,806 cars returned to service. Of the 502,853 cars that were in storage on July 1, 2009 (excluding those that last moved loaded prior to 2005), only 49,665 remained in storage continuously through April 1, 2012. Nearly 90 percent of the cars that were in storage at the peak have either carried a load since then (and perhaps subsequently returned to storage) or been scrapped.
North American Freight Cars in Storage
550,000
31.9% of the fleet
Change in Number of Freight Cars in Storage

15,000 10,000 5,000
500,000 450,000 400,000 350,000 300,000 250,000 200,000

n/a
0 -5,000 -10,000
19.6% of the fleet
-15,000 -20,000 -25,000 -30,000 -35,000

May-Dec '09
Mar-Dec '09
2010
2011
2012
2010
2011
2012
Data are as of the first of the month; % are cars stored as % of total fleet. Source: AAR
Figure for Jan. 2011 = difference in cars in storage on Feb. 1, 2011 compared to cars in storage on Jan. 1, 2011; other months calculated similarly. Source: AAR
Where to go for more information: Contact Frank Hardesty (fhardesty@aar.org, 202-639-2321). Media inquiries should go to Holly Arthur (harthur@aar.org, 202-639-2344).
Page 40 of 40

Rail Time Indicators: A Review of Key Economic Trends Shaping Demand For Rail Transportation

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Rail Time Indicators

A Review of Key Economic Trends Shaping Demand for Rail Transportation

Policy & Economics Department Association of American Railroads Washington, D.C.

SUMMARY OF MOST RECENT DATA

Rail Time Indicators April 6, 2012

U.S. AND CANADIAN FREIGHT RAILROAD TRAFFIC

Average Weekly U.S. Rail Carloads: All Commodities

-20% -25% 2006 2007 2008 2009

Rail Time Indicators April 6, 2012

Average Weekly U.S. Rail Intermodal Traffic

2006 (peak year) 2012 2011

Rail Time Indicators April 6, 2012

Avg. Weekly Canadian Rail Carloads: All Commodities

Average Weekly Canadian Rail Intermodal Traffic

-15% -20% Jul Aug Sep Oct Nov Dec -25%

34,000 Jan Feb Mar Apr May Jun

Rail Time Indicators April 6, 2012

U.S. RAIL TRAFFIC: MARCH 2012*

Average Weekly U.S. Rail Traffic: Total Carloads + Intermodal Units

2006 (peak year)

Rail Time Indicators April 6, 2012

U.S. RAIL TRAFFIC: FIRST QUARTER 2012*

Rail Time Indicators April 6, 2012

CANADIAN RAIL TRAFFIC: MARCH 2012*

Average Weekly Canadian Rail Traffic: Total Carloads + Intermodal Units

Rail Time Indicators April 6, 2012

CANADIAN RAIL TRAFFIC: FIRST QUARTER 2012*

-5% -10% -15% -20% -25%

Rail Time Indicators April 6, 2012

COMBINED U.S. AND CANADIAN RAIL TRAFFIC: MARCH 2012*

2006 (peak year)

-10% -15% -20% -25% -30% 2006 2007 2008 2009

Rail Time Indicators April 6, 2012

COMBINED U.S. AND CANADIAN RAIL TRAFFIC: FIRST QUARTER 2012*

Rail Time Indicators April 6, 2012

110,000 Jan Feb Mar Apr May Jun

Avg. Weekly Canadian Rail Carloads of Coal

-10% -20% -30%

U.S. Natural Gas Production: Jan. 2006 - Dec. 2011

-12% -16% -20%

*Year beginning July 2011

Source: National Weather Service

Rail Time Indicators April 6, 2012

31,000 30,000 29,000

-15% -20% -25% 2006 2007 2008 2009

Avg. Weekly Canadian Rail Carloads of Chemicals

Class I Rail Tons Originated by Commodity: 2011

Class I Gross Revenue by Commodity: 2011

Total = $65.3 billion

Primary metal prod. - 49.1 mil.

Rail Time Indicators April 6, 2012

22,000 20,000 18,000

Average Weekly Canadian Rail Carloads of Grain

Modal Shares for Total U.S. Grain Movements: 2001-2010

20% 10% 0% '01 '02 '03 '04

Source: USDA Agricultural Marketing Service

Rail Time Indicators April 6, 2012

QUARTERLY CHANGES, SELECT COMMODITIES

-15% -20% 2006 2007 2008 2009 2010 2011 2012

Rail Time Indicators April 6, 2012

CARLOAD AND INTERMODAL TOTALS

U.S. Rail Intermodal Traffic: Jan. 2006 - March 2012