Jim Blaze: Commentary - What is the risk to rail freight volume?

Jim Blaze

It’s not a forecast. It’s a prudent warning…

The continuing coronavirus pandemic and our social reaction so far are driving our business culture towards a high-risk economic impact.

Stay-in-place warnings and increasingly mandated government requirements will drive down income and gross domestic product (GDP). Fundamentally, the American economy will likely face choosing survival spending tactics.

Cash will be preserved. A survival kit approach to managing family budgets will focus on water, food, shelter, heat, and medicines.

Budgets will be managed as if there is no discretionary income to be spent on non-essentials. 

How long will the internet and individual cell phone accounts be maintained? That’s an unbelievable question to even ask. Or is it?

Experts can’t agree on the level of economic impact. Just a week ago some suggested that the chance of a U.S. recession was about 50-50%. It was less than 30% three weeks ago. 

Nobody knows. There are no previous experiences like this pandemic pattern upon which to build a reliable input/output GDP change model. We are all flying blind. 

With this as background, let’s briefly examine what the role of the rail freight sector is. How relevant are rail freight’s services during a stay-in-place period? What are rail freight’s capabilities at serving the essential survival kit?

Let’s be simple about this. How much petrol and car flexibility do we need under such grim conditions?

Is this anything like the months after the bombing of Pearl Harbor? 

When the U.S. entered World War II, there was definitely an important role for railroad companies to move the nation’s freight and people. Railroads moved more than 60% of the nation’s freight volume back then. That included express parcel movement in carload units. 

This is now. In 2020 trucks are moving emergency supplies and food. Truck volume was up by more than 15% year-over-year last week.