Rail Time Indicators July 2010

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Rail Time Indicators July 2010 Powered By Docstoc
					 Rail Time Indicators
  A Review of Key Economic Trends
Shaping Demand for Rail Transportation




   Policy & Economics Department
  Association of American Railroads
           Washington, DC




            July 13, 2010
                                   Association of American Railroads




    Rail Time Indicators is a non-technical summary of many of the key economic indicators
    potentially of interest to U.S. freight railroads. It is issued monthly free of charge by the
          Policy and Economics Department of the Association of American Railroads.

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        please contact Dan Keen (dkeen@aar.org) or Shannon Stare (sstare@aar.org).


       Previous 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 inherent imprecision in the
 adjustment process and the possibility of further refinements, the seasonally adjusted figures
  should be viewed as a complement to, rather than a replacement for, the unadjusted data.


 Copyright © 2010 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.


  Information in Rail Time Indicators is obtained from sources that are 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.




                                  Rail Time Indicators – June 13, 2010
                                           Association of American Railroads


                                SUMMARY OF MOST RECENT DATA

Economic Indicator                     Most Recent Data

U.S. Freight Rail Traffic (p. 2)       Not Seasonally Adjusted: Carloads in June 2010 ↑ 10.6% from June
                                       2009, ↓ 10.2% from June 2008. Weekly average of 283,126 carloads
                                       in June 2010 ↓ from 288,419 in May 2010 and 294,758 in April 2010.
                                       Intermodal in June 2010 ↑ 19.2% from June 2009, ↓ 1.4% from June
                                       2008. Weekly average of 220,267 intermodal trailers and containers in
                                       June 2010 highest since October 2008.
                                       Seasonally Adjusted: Carloads in June 2010 ↓ 1.3% from May 2010;
                                       intermodal in June 2010 ↓ 1.1% from May 2010.

Canadian Freight Rail Traffic          Not Seasonally Adjusted: Carloads in June 2010 ↑ 23.0% from June
(p. 5)                                 2009, ↓ 7.6% from June 2008. Intermodal in June 2010 ↑ 25.5% from
                                       June 2009 and ↑ 1.4% from June 2008.
                                       Seasonally Adjusted: Carloads in June 2010 ↑ 1.1% from May 2010.
                                       Intermodal in June 2010 ↑ 1.6% from May 2010.

Gross Domestic Prod. (p. 16)           ↑ 2.7% in Q1 2010 (third estimate released June 25).

Purchasing Managers Index              ↓ to 56.2 in June 2010 from 59.7 in May 2010 and 60.4 in April 2010.
(p. 18)                                New orders component ↓ to 58.5 in June 2010 from 65.7 in May 2010

Manufacturing Inventories              Manufacturing sales ↓ 1.3%, manufacturing inventories ↓ 0.4%, and
and Sales (p. 19)                      inventory-to-sales ratio ↑ 0.9% in May 2010 from April 2010.

Industrial Production (p. 20)          ↑ 1.3% in May 2010 from April 2010, the 11th straight monthly increase
                                       and the largest monthly increase since July 2009. Manufacturing rose
                                       1.0% in May 2010 from April 2010.

Capacity Utilization (p. 21)           ↑ to 74.1% in May 2010 from 73.1% in April 2010.

Employment (p. 22)                     ↓ 125,000 in June 2010 from May 2010 as the loss of 225,000 Census-
                                       related jobs offset 83,000 new private sector jobs.

Unemployment Rate (p. 22)              ↓ to 9.5% in June 2010 from 9.7% in May 2010. Drop in unemployment
                                       rate due mainly to sharp drop in size of labor force, not job growth.

Railroad Employment (p. 24)            ↑ 218 to 149,967 employees in May 2010 from 149,749 in April 2010.

Consumer Confidence (p. 25)            ↓ to 52.9 in June 2010 from 62.7 in May 2010.

Retail Sales (p. 26)                   ↓ 1.2% ($4.4 billion) in May 2010 from April 2010.

Light Vehicle Sales (p. 27)            ↓ 4.8% in June 2010 from May 2010 to annualized 11.1 million.

Housing Starts (p. 28)                 ↓ 10.0% in May 2010 from April 2010 to 593,000, the lowest of any
                                       month this year.

Consumer Price Index (p. 29)           ↓ 0.2% in May 2010 from April 2010; “core” inflation was up 0.1%.
                                       Inflation is not a problem right now.

Exchange Rate Index (p. 30)            ↑ 0.6% in June 2010 (i.e., dollar got stronger) from May 2010.

Rail Freight Cars in Storage           ↓ to 365,279 on July 1, 2010 (23.7% of the fleet) from 368,343 (23.8%)
(p. 30)                                on June 1, 2010.


Rail Time Indicators – July 13, 2010                                                                Page 1 of 31
                                                                       Association of American Railroads



    U.S. AND CANADIAN FREIGHT RAILROAD TRAFFIC
    Who releases it and when?
    •             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 figures in Rail Time Indicators. When comparing year-over-year rail
                  traffic, comparisons are always made to the period 52 weeks prior to the present period.

    What is it and why is it important?
    •             The AAR traffic report details rail carloadings by railroad for 19 different major commodity
                  categories, as well as intermodal units (truck trailers and containers). Railroads that report their
                  data to the AAR collectively account for the vast majority of total U.S. and Canadian freight traffic.
    •             Freight railroading is a “derived demand” industry — demand for rail service occurs as a result of
                  demand elsewhere in the economy for the products that railroads haul. Thus, rail traffic is a
                  useful gauge of broad national and international economic activity.

    What are the latest numbers for U.S. railroads?
    •             U.S. freight railroads originated 1,415,630 carloads in June 2010, an average of 283,126 carloads
                  per week — up 10.6% from June 2009 (see chart below right) but down 10.2% from June 2008
                  on a non-seasonally adjusted basis. In the second quarter of 2010, carloads were up 13.8%
                  over the second quarter of 2009. For the first six months of 2010, carloads were up 7.8% over
                  the first six months of 2009.
    •             June 2010’s weekly average of 283,126 carloads was down from May 2010’s 288,419 average
                  and down from April 2010’s 294,758 average (see chart below left). In other words, after four
                  straight months of increasing average carloads (January to April 2010), average weekly carloads
                  have fallen for two straight months (May and June 2010) on a non-seasonally adjusted basis.


Average Weekly U.S. Rail Carloads: All Commodities                                               % Change in Total U.S. Rail Carloads From Same
                           (not seasonally adjusted)                                               Month Previous Year: Jan. 2006 - June 2010
360,000                                                                                       20%
                                                      2006                         2007
                                                                                              15%
340,000                                                                                                    June 2010 was up 10.6% over June
                                                                                              10%          2009 but down 10.2% from June 2008.
320,000                                                                                        5%

300,000                                                                                        0%
                 2010
                                                                        2008
                                                                                              -5%
280,000
                                                                                              -10%

260,000                                                                                       -15%
                                                               2009
                                                                                              -20%
240,000
                                                                                              -25%
            Jan Feb Mar Apr May Jun                   Jul Aug Sep Oct Nov Dec                               2006             2007             2008             2009              2010
 Data are weekly average originations for each month, exclude the U.S. operations of CN and    Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
 CP, and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic        CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




    •             On a seasonally adjusted basis, U.S. rail carloads fell 1.3% in June 2010 from May 2010
                  (see chart on page 15), following a 1.1% decline in May 2010 from April 2010. After bottoming
                  out in May 2009, seasonally adjusted rail carloads trended upward, with some fits and starts
                  along the way, through April 2010. They’ve now declined for two consecutive months.
    •             The declines in rail carloads over the past couple months have not been huge, and they
                  certainly don’t prove that the wheels are coming off the economy’s bus. After all, the
                  improvement in carloads this year over last year is still significant: U.S. railroads originated
                  136,136 more carloads in June 2010, and 454,708 more carloads in the second quarter of
                  2010, than they did in the comparable periods in 2009.



    Rail Time Indicators – July 13, 2010                                                                                                                           Page 2 of 31
                                             Association of American Railroads



•        That said, an economy several months into a recovery from the worst recession in decades
         should be yielding rail traffic levels heading north, not south. (Remember, demand for rail service
         occurs as a result of demand elsewhere in the economy for the products that railroads haul.)
         Thus, rail traffic in June 2010 is consistent with an economy that is in far better shape than it was
         nine months or a year ago, but is, in the words of former Federal Reserve Chairman Alan
         Greenspan, “more than likely” undergoing a “pause.”
•        The table below shows where the carloads in June 2010 went compared to April and May 2010.
         On a non-seasonally adjusted basis, U.S. railroads originated 11,632 fewer carloads per week
         in June 2010 than in April 2010, including 6,732 fewer carloads of coal, 1,756 fewer carloads of
         grain, 1,435 fewer carloads of chemicals, and 1,088 fewer carloads of waste and scrap materials.
         The decline in carloads is spread across various commodities rather than concentrated in just
         one or two. That too is consistent with the view that the broad economic recovery has lost some
         of its vigor in the past couple of months.


                                U.S. RAIL TRAFFIC: APRIL vs. MAY vs. JUNE 2010*
                                                                                                   Difference
                Commodity                              Apr. '10      May '10       June '10   Apr-June May-June
                Agricultural & food products            37,924        36,653        35,671      -2,253      -982
                 Grain                                  20,958        19,751        19,202      -1,756      -549
                 Farm products excl. grain                 849           880           808         -41       -71
                 Grain mill products                     8,217         8,094         8,007        -209       -87
                 Food products                           7,901         7,928         7,654        -247      -274
                Chemicals and petroleum                 35,391        34,860        34,297      -1,094      -563
                 Chemicals                              29,872        29,063        28,437      -1,435      -627
                 Petroleum products                      5,519         5,797         5,860         341        63
                Coal                                   132,530       126,481       125,797      -6,732      -684
                Forest products                         10,436        10,052         9,987        -449       -65
                 Primary forest products                 1,810         1,646         1,603        -207       -43
                 Lumber & wood products                  3,037         2,837         2,511        -526      -326
                 Pulp & paper products                   5,589         5,569         5,873         285       304
                Metallic ores and metals                19,572        20,680        20,539         967      -140
                 Metallic ores                           6,448         6,988         7,156         709       169
                 Coke                                    3,486         3,699         3,584          98      -115
                 Primary metal products                  9,639         9,994         9,800         161      -194
                Motor vehicles & parts                  12,298        13,018        12,443         145      -575
                Nonmetallic minerals & prod.            31,770        32,428        31,285        -485    -1,143
                 Crushed stone, gravel, sand            18,905        19,255        18,612        -293      -643
                 Nonmetallic minerals                    5,373         5,706         5,311         -61      -395
                 Stone, clay & glass prod.               7,493         7,468         7,362        -131      -106
                Other                                   14,837        14,247        13,106      -1,731    -1,141
                 Waste & scrap materials                 9,149         8,704         8,061      -1,088      -643
                 All other carloads                      5,688         5,543         5,045        -643      -498
                TOTAL ALL CARLOADS                     294,758       288,419       283,126     -11,632    -5,293

                Figures are weekly averages. Source: AAR Weekly Railroad Traffic



•        Commodities with the largest carload gains in June 2010 over June 2009 include steel and other
         primary metal products (up 21,547 carloads, or 78.5%), motor vehicles and parts (up 20,967
         carloads, or 50.8%), and metallic ores (up 20,864 carloads, or 139.9%). The tables and charts
         beginning on page 6 have more commodity-level detail. In June 2010, 16 of the 19 major
         commodity categories saw carload gains compared to June 2009, and one (the catch-all “all
         other” category) saw a gain in June 2010 compared to June 2008. 16 of the 19 commodity
         categories saw carload declines in June 2010 compared with May 2010 (see table above).




Rail Time Indicators – July 13, 2010                                                                           Page 3 of 31
                                                                        Association of American Railroads



      •             U.S. railroads originated an average of 220,267 intermodal trailers and containers per week in
                    June 2010. That’s the highest weekly average since October 2008, up 19.2% from June
                    2009, and the largest year-over-year monthly gain since AAR records begin in 1990
                    (breaking the previous record of 18.9% set in May 2010).
      •             Unlike U.S. rail carload traffic, U.S. rail intermodal volume has risen for four straight months on
                    a non-seasonally adjusted basis (see chart below left). On a seasonally adjusted basis, though,
                    U.S. rail intermodal traffic actually fell 1.1% in June 2010 from May 2010 following three straight
                    months in which seasonally adjusted intermodal volume rose (see the top right chart on page 15).


          Average Weekly U.S. Rail Intermodal Traffic                                                 % Change in Total U.S. Rail Intermodal Traffic
                            (not seasonally adjusted)                                              From Same Month Prev. Year: Jan. 2006 - June 2010
260,000
                                                                                                  20%
250,000                               2006                                        2007                                 June 2010 was up 19.2% from June 2009
                                                                                                  15%
240,000                                                                                                                and down just 1.4% from June 2008.
                                                                                                  10%
230,000
                                                                                                    5%
220,000
                                                                       2008                         0%
210,000
                                                                                                   -5%
                                                   2009
200,000                           2010
                                                                                                  -10%
190,000
                                                                                                  -15%
180,000
                                                                                                  -20%
170,000
                                                                                                  -25%
            Jan Feb Mar Apr May Jun                  Jul Aug Sep Oct Nov Dec                                    2006             2007              2008             2009              2010
 Data are weekly average originations for each month, exclude U.S. operations of CN and CP, and   Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
 reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic                   CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




      •             Average weekly container volume on U.S. railroads in June 2010 was the ninth highest since
                    1990 (when AAR data begin), reflecting a years-long trend of domestic freight converting from
                    truck trailers on rail to containers on rail. Average monthly truck trailer volume in 2009 and
                    2010 in some months has been only half what it was just a few years ago.
      •             Containers can usually be double-stacked on rail flat cars (this can’t happen with trailers) and are
                    often easier to handle than trailers. This makes using containers more efficient and cost effective
                    for many shippers than using truck trailers. In 2000, trailers accounted for 31% of U.S. intermodal
                    loadings. In 2010 through June, they accounted for 15%. Total U.S. intermodal volume in June
                    2010 was the 34th-highest month ever. The best rail intermodal months in history were in 2006
                    and 2007 (see chart above left).
      •             For the purposes of AAR rail traffic data, June 2010 consists of the five weeks from May 30
                    through July 3, 2010 — i.e., it does not include the 4th of July but does include Memorial Day,
                    which was observed on May 31 this year. By comparison, June 2009 consists of the five weeks
                    from May 31 through July 4, 2009. June 2009 thus includes the 4th of July holiday (which was
                    observed on July 3 in 2009) but does not include Memorial Day, which was observed on May 25
                    in 2009. Finally, June 2008 consists of the five weeks from June 1 through July 5, 2008, so it too
                    includes the 4th of July holiday but excludes Memorial Day, which was observed on May 26,
                    2008. The bottom line is that June for all three years includes one major holiday.

      What are the latest numbers for Canadian railroads?
      •             On a non-seasonally adjusted basis, Canadian railroads originated 358,217 carloads of freight in
                    June 2010, an average of 71,643 carloads per week. That’s up 23.0% from June 2009 and
                    down 7.6% from June 2008. Canadian carloads have fluctuated within a fairly narrow band for
                    the first six months of 2010 (see the top left chart on the next page).




      Rail Time Indicators – July 13, 2010                                                                                                                               Page 4 of 31
                                                                        Association of American Railroads



  •              Canadian carloads in June 2010 were higher in 14 of the 19 commodity categories from June
                 2009 and in 5 of the 19 categories from June 2008. The biggest gains in June 2010 over June
                 2009 were in metallic ores (up 36,500 carloads, or 154.2%), chemicals (up 13,186 carloads,
                 23.9%), and motor vehicles and parts (up 8,919 carloads, 51.8%). See page 7 for more
                 commodity-level detail.
  •              Canadian railroads also originated 241,376 trailers and containers in June 2010. At 48,275 units
                 per week, that’s the highest weekly average since October 2008, up 25.5% from June 2009
                 (the highest year-over-year percentage increase ever), and up 1.4% from June 2008.
  •              On a seasonally adjusted basis, in June 2010 total Canadian rail carloads and intermodal
                 trailers and containers were up 1.1% and up 1.6%, respectively, from May 2010 (see the charts
                 in the middle of page 15).


Avg. Weekly Canadian Rail Carloads: All Commodities                                                   % Change in Total Canadian Rail Carloads From
                             (not seasonally adjusted)                                               Same Month Previous Year: Jan. 2006 - June 2010
100,000                                                                                            35%
                                                                                                   30%
 90,000                                                                                            25%                      June 2010 was up 23.0% from June
                                                              2006                      2007
                                                                                                   20%                      2009 and down 7.6% from June 2008.
 80,000                                                                                            15%
                                                                                                   10%
                                                                                                    5%
 70,000                                                                                             0%
                               2010
                                                                                 2008              -5%
 60,000                                                                                           -10%
                                                                                                  -15%
                                                              2009                                -20%
 50,000
                                                                                                  -25%
                                                                                                  -30%
 40,000
                                                                                                  -35%
             Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                                     2006             2007              2008              2009              2010
Data are weekly average originations for each month, include CN and CP (including their U.S.      Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.
operations), and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic   operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




      Average Weekly Canadian Rail Intermodal Traffic                                              % Change in Total Canadian Intermodal Traffic From
                              (not seasonally adjusted)                                             Same Month Previous Year: Jan. 2006 - June 2010
55,000                                                                                            30%
                                                                                      2007
                                                       2008                                       25%
50,000                                                                                            20%
                2010                                                                              15%
45,000                                                                                            10%
                                                2006                                                5%
40,000                                                                                              0%
                                                                                                   -5%
                                  2009                                                                            June 2010 was up 25.5%
                                                                                                  -10%            from June 2009 and up
35,000
                                                                                                  -15%            1.4% from June 2008.
                                                                                                  -20%
30,000
                                                                                                  -25%
            Jan Feb Mar Apr May Jun                     Jul    Aug Sep Oct Nov Dec
                                                                                                                 2006             2007              2008              2009              2010
      Data are based on originations, include CN and CP (including their U.S. operations), and    Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.
      reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic                operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




  Rail Time Indicators – July 13, 2010                                                                                                                               Page 5 of 31
                                                                          Association of American Railroads



                                                                      U.S. RAIL TRAFFIC: JUNE 2010*
                                                                              (5 weeks ending July 3, 2010)
                                                                                                                          Difference                            % Change
           Commodity                                              June '10           June '09     June '08              '10-'09     '10-'08                   '10-'09  '10-'08
           Agricultural & food products                           178,355            171,449       203,706              6,906           -25,351                4.0%           -12.4%
            Grain                                                  96,008             85,795       109,445             10,213           -13,437               11.9%           -12.3%
            Farm products excl. grain                               4,041              4,161         4,476               -120              -435               -2.9%            -9.7%
            Grain mill products (1)                                40,036             43,074        45,535             -3,038            -5,499               -7.1%           -12.1%
            Food products                                          38,270             38,419        44,250               -149            -5,980               -0.4%           -13.5%
           Chemicals and petroleum                                171,484            155,320       183,847             16,164           -12,363               10.4%            -6.7%
            Chemicals                                             142,183            127,446       152,475             14,737           -10,292               11.6%            -6.7%
            Petroleum products (2)                                 29,301             27,874        31,372              1,427            -2,071                5.1%            -6.6%
           Coal                                                   628,987            616,121       662,431             12,866           -33,444                2.1%            -5.0%
           Forest products                                         49,936             48,951        66,665                985           -16,729                2.0%           -25.1%
            Primary forest products (3)                             8,016              7,702        10,843                314            -2,827                4.1%           -26.1%
            Lumber & wood products                                 12,554             11,940        19,069                614            -6,515                5.1%           -34.2%
            Pulp & paper products                                  29,366             29,309        36,753                 57            -7,387                0.2%           -20.1%
           Metallic ores and metals                               102,696             54,852       124,729             47,844           -22,033               87.2%           -17.7%
            Metallic ores (4)                                      35,780             14,916        42,227             20,864            -6,447              139.9%           -15.3%
            Coke                                                   17,918             12,485        19,480              5,433            -1,562               43.5%            -8.0%
            Primary metal products (5)                             48,998             27,451        63,022             21,547           -14,024               78.5%           -22.3%
           Motor vehicles & parts                                  62,216             41,249        83,461             20,967           -21,245               50.8%           -25.5%
           Nonmetallic minerals & prod.                           156,426            135,544       176,298             20,882           -19,872               15.4%           -11.3%
            Crushed stone, gravel, sand                            93,060             77,108       102,891             15,952            -9,831               20.7%            -9.6%
            Nonmetallic minerals (6)                               26,557             23,748        29,213              2,809            -2,656               11.8%            -9.1%
            Stone, clay & glass prod. (7)                          36,809             34,688        44,194              2,121            -7,385                6.1%           -16.7%
           Other                                                   65,530             56,008        74,586              9,522            -9,056               17.0%           -12.1%
            Waste & scrap materials (8)                            40,305             32,687        50,864              7,618           -10,559               23.3%           -20.8%
            All other carloads                                     25,225             23,321        23,722              1,904             1,503                8.2%             6.3%
           TOTAL ALL CARLOADS                                   1,415,630          1,279,494     1,575,723            136,136          -160,093               10.6%           -10.2%

           Trailers                                                162,201            151,668     243,728              10,533            -81,527               6.9%           -33.4%
           Containers                                              939,132            772,622     873,439             166,510             65,693              21.6%             7.5%
           TOTAL ALL INTERMODAL                                 1,101,333             924,290    1,117,167            177,043            -15,834               19.2%            -1.4%

           (1) - flour, animal feed, corn syrup, corn starch, soybean meal, etc.                  (5) - primarily iron & steel products; some aluminum, copper, etc.
           (2) - liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.              (6) - phosphate rock, rock salt, crude sulphur, clay, etc.
           (3) - wood raw materials such as pulpwood and wood chips                               (7) - cement, ground earths or minerals, gypsum, etc.
           (4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.                 (8) - scrap metal and paper, construction debris, ashes, etc.

           *Data are originations and are not seasonally adjusted. Includes BNSF, CSX, KCS, NS, UP, Birmingham Southern, Florida East Coast, Lake
           Superior & Ishpeming, and Paducah & Louisville. Does not include CN's and CP's U.S. operations. Source: AAR Weekly Railroad Traffic




                   Average Weekly U.S. Rail Traffic:                                                  % Change in U.S. Rail Carloads + Intermodal Units
                  Total Carloads + Intermodal Units                                                  From Same Month Prev. Year: Jan. 2006 - June 2010
625,000                                                                                             20%
600,000           2006 (most traffic ever for U.S. railroads
                                                                                                    15%
575,000                                                                                             10%
550,000                                                                                              5%
525,000                              2007 (second most ever )
                                                                                                     0%
                    2010                                                   2008
500,000
                                                                                                    -5%
475,000
                                        2009                                                       -10%          June 2010 was up 14.2%
450,000                                                                                                          from June 2009 and down
                                                                                                   -15%
425,000                                                                                                          6.5% from June 2008.
                                                                                                   -20%
400,000
                                                                                                   -25%
             Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                                      2006             2007              2008             2009              2010
Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.      Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and CP,
operations of CN and CP, and reflect revisions from original reporting. Source: AAR                 and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




      Rail Time Indicators – July 13, 2010                                                                                                                                 Page 6 of 31
                                                                            Association of American Railroads



                                                                 CANADIAN RAIL TRAFFIC: JUNE 2010*
                                                                                (5 weeks ending July 3, 2010)
                                                                                                                               Difference                             % Change
            Commodity                                              June '10           June '09        June '08               '10-'09     '10-'08                    '10-'09  '10-'08
            Agricultural & food products                              71,048            79,413          67,887               -8,365              3,161             -10.5%             4.7%
             Grain                                                    39,025            47,669          40,255               -8,644             -1,230             -18.1%            -3.1%
             Farm products excl. grain                                13,287            14,364           9,010               -1,077              4,277              -7.5%            47.5%
             Grain mill products (1)                                   6,920             7,086           8,240                 -166             -1,320              -2.3%           -16.0%
             Food products                                            11,816            10,294          10,382                1,522              1,434              14.8%            13.8%
            Chemicals and petroleum                                   71,685            58,052          76,102               13,633             -4,417              23.5%            -5.8%
             Chemicals                                                68,438            55,252          72,705               13,186             -4,267              23.9%            -5.9%
             Petroleum products (2)                                    3,247             2,800           3,397                  447               -150              16.0%            -4.4%
            Coal                                                      41,310            37,980          40,395                3,330                915               8.8%             2.3%
            Forest products                                           36,096            34,370          44,599                1,726             -8,503               5.0%           -19.1%
             Primary forest products (3)                               7,791             6,910           9,418                  881             -1,627              12.7%           -17.3%
             Lumber & wood products                                   11,045            10,313          13,694                  732             -2,649               7.1%           -19.3%
             Pulp & paper products                                    17,260            17,147          21,487                  113             -4,227               0.7%           -19.7%
            Metallic ores and metals                                  74,508            32,826          85,091               41,682            -10,583             127.0%           -12.4%
             Metallic ores (4)                                        60,173            23,673          68,926               36,500             -8,753             154.2%           -12.7%
             Coke                                                      3,264             1,963           2,020                1,301              1,244              66.3%            61.6%
             Primary metal products (5)                               11,071             7,190          14,145                3,881             -3,074              54.0%           -21.7%
            Motor vehicles & parts                                    26,148            17,229          28,426                8,919             -2,278              51.8%            -8.0%
            Nonmetallic minerals & prod.                              27,768            21,358          32,326                6,410             -4,558              30.0%           -14.1%
             Crushed stone, gravel, sand                              15,006             8,891          14,876                6,115                130              68.8%             0.9%
             Nonmetallic minerals (6)                                  5,748             6,378           9,229                 -630             -3,481              -9.9%           -37.7%
             Stone, clay & glass prod. (7)                             7,014             6,089           8,221                  925             -1,207              15.2%           -14.7%
            Other                                                      9,654            10,042          12,820                 -388             -3,166              -3.9%           -24.7%
             Waste & scrap materials (8)                               5,854             5,075           8,363                  779             -2,509              15.3%           -30.0%
             All other carloads                                        3,800             4,967           4,457               -1,167               -657             -23.5%           -14.7%
            TOTAL ALL CARLOADS                                       358,217           291,270         387,646               66,947            -29,429              23.0%            -7.6%

            Trailers                                                   8,446             7,567          10,259                  879              -1,813              11.6%          -17.7%
            Containers                                               232,930           184,691         227,886               48,239               5,044              26.1%            2.2%
            TOTAL ALL INTERMODAL                                     241,376           192,258         238,145               49,118               3,231              25.5%              1.4%

           (1) - flour, animal feed, corn syrup, corn starch, soybean meal, etc.                      (5) - primarily iron & steel products; some aluminum, copper, etc.
           (2) - liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.                  (6) - phosphate rock, rock salt, crude sulphur, clay, etc.
           (3) - wood raw materials such as pulpwood and wood chips                                   (7) - cement, ground earths or minerals, gypsum, etc.
           (4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.                     (8) - scrap metal and paper, construction debris, ashes, etc.

             *CN and CP, including their U.S. operations. Data are originations and are not seasonally adjusted. Source: AAR Weekly Railroad Traffic




              Average Weekly Canadian Rail Traffic:                                                      % Change in Canadian Carloads + Intermodal Units
                Total Carloads + Intermodal Units                                                        From Same Month Prev. Year: Jan. 2006 - June 2010
 140,000                                                                                                 30%
                                                                                        2007             25%
                                                                                                         20%
 130,000
                                                                                                         15%
                                                                                                         10%
 120,000                                                                                                  5%
                                                              2006         2008
                                                                                                          0%
 110,000                        2010                                                                     -5%
                                                                                                        -10%
                                            2009                                                                       June 2010 was up 24.0%
 100,000                                                                                                -15%
                                                                                                        -20%           from June 2009 and down
                                                                                                                       4.2% from June 2008.
                                                                                                        -25%
  90,000                                                                                                -30%
              Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                                         2006              2007              2008              2009             2010
Data are weekly average originations for each month, are not seasonally adjusted, include CN and CP    Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.
(including their U.S. operations), and reflect revisions from original reporting. Source: AAR          operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




        Rail Time Indicators – July 13, 2010                                                                                                                                   Page 7 of 31
                                                                         Association of American Railroads



                                           COMBINED U.S. AND CANADIAN RAIL TRAFFIC: JUNE 2010*
                                                                               (5 weeks ending July 3, 2010)
                                                                                                                           Difference                               % Change
          Commodity                                               June '10            June '09    June '08               '10-'09     '10-'08                      '10-'09  '10-'08
          Agricultural & food products                            249,403             250,862       271,593             -1,459             -22,190               -0.6%             -8.2%
           Grain                                                  135,033             133,464       149,700              1,569             -14,667                1.2%             -9.8%
           Farm products excl. grain                               17,328              18,525        13,486             -1,197               3,842               -6.5%             28.5%
           Grain mill products (1)                                 46,956              50,160        53,775             -3,204              -6,819               -6.4%            -12.7%
           Food products                                           50,086              48,713        54,632              1,373              -4,546                2.8%             -8.3%
          Chemicals and petroleum                                 243,169             213,372       259,949             29,797             -16,780               14.0%             -6.5%
           Chemicals                                              210,621             182,698       225,180             27,923             -14,559               15.3%             -6.5%
           Petroleum products (2)                                  32,548              30,674        34,769              1,874              -2,221                6.1%             -6.4%
          Coal                                                    670,297             654,101       702,826             16,196             -32,529                2.5%             -4.6%
          Forest products                                          86,032              83,321       111,264              2,711             -25,232                3.3%            -22.7%
           Primary forest products (3)                             15,807              14,612        20,261              1,195              -4,454                8.2%            -22.0%
           Lumber & wood products                                  23,599              22,253        32,763              1,346              -9,164                6.0%            -28.0%
           Pulp & paper products                                   46,626              46,456        58,240                170             -11,614                0.4%            -19.9%
          Metallic ores and metals                                177,204              87,678       209,820             89,526             -32,616              102.1%            -15.5%
           Metallic ores (4)                                       95,953              38,589       111,153             57,364             -15,200              148.7%            -13.7%
           Coke                                                    21,182              14,448        21,500              6,734                -318               46.6%             -1.5%
           Primary metal products (5)                              60,069              34,641        77,167             25,428             -17,098               73.4%            -22.2%
          Motor vehicles & parts                                   88,364              58,478       111,887             29,886             -23,523               51.1%            -21.0%
          Nonmetallic minerals & prod.                            184,194             156,902       208,624             27,292             -24,430               17.4%            -11.7%
           Crushed stone, gravel, sand                            108,066              85,999       117,767             22,067              -9,701               25.7%             -8.2%
           Nonmetallic minerals (6)                                32,305              30,126        38,442              2,179              -6,137                7.2%            -16.0%
           Stone, clay & glass prod. (7)                           43,823              40,777        52,415              3,046              -8,592                7.5%            -16.4%
          Other                                                    75,184              66,050        87,406              9,134             -12,222               13.8%            -14.0%
           Waste & scrap materials (8)                             46,159              37,762        59,227              8,397             -13,068               22.2%            -22.1%
           All other carloads                                      29,025              28,288        28,179                737                 846                2.6%              3.0%
          TOTAL ALL CARLOADS                                    1,773,847           1,570,764     1,963,369            203,083            -189,522               12.9%             -9.7%

          Trailers                                                170,647              159,235      253,987             11,412              -83,340                7.2%           -32.8%
          Containers                                            1,172,062              957,313    1,101,325            214,749               70,737               22.4%             6.4%
          TOTAL ALL INTERMODAL                                  1,342,709           1,116,548     1,355,312            226,161              -12,603               20.3%             -0.9%

          (1) - flour, animal feed, corn syrup, corn starch, soybean meal, etc.                    (5) - primarily iron & steel products; some aluminum, copper, etc.
          (2) - liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.                (6) - phosphate rock, rock salt, crude sulphur, clay, etc.
          (3) - wood raw materials such as pulpwood and wood chips                                 (7) - cement, ground earths or minerals, gypsum, etc.
          (4) - overwhelmingly iron ore, but some aluminum ore, copper ore, etc.                   (8) - scrap metal and paper, construction debris, ashes, etc.

          *Data are originations and are not seasonally adjusted. Source: AAR Weekly Railroad Traffic




     Average Weekly U.S. + Canadian Rail Traffic:                                                   % Change in Combined U.S. + Canadian Rail Carloads
          Total Carloads + Intermodal Units                                                           + Intermodal Units From Same Month Prev. Year:
750,000                                                                                                            Jan. 2006 - June 2010
                                                                                                    20%
725,000              2006                                                              2007
                                                                                                    15%
700,000
                                                                                                    10%
675,000
                                                                                                     5%
650,000
                                                                       2008                          0%
625,000       2010
                                                                                                     -5%
600,000
                                                2009                                                -10%          June 2010 was up 16.0%
575,000
                                                                                                    -15%          from June 2009 and down
550,000                                                                                                           6.1% from June 2008.
                                                                                                    -20%
525,000
                                                                                                    -25%
500,000
                                                                                                    -30%
           Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                                       2006              2007               2008              2009               2010
  Data are weekly average originations for each month, are not seasonally adjusted, and reflect         Data are based on originations, are not seasonally adjusted, and reflect revisions to original
  revisions from original reporting. Source: AAR Weekly Railroad Traffic                                reporting. Source: AAR Weekly Railroad Traffic




    Rail Time Indicators – July 13, 2010                                                                                                                                    Page 8 of 31
                                                                           Association of American Railroads



                                                                                                   COAL
                 U.S. railroads averaged 125,797 carloads of coal per week in June 2010, the lowest weekly
       average since January 2010 and the third straight monthly decline. Most coal is used to generate
       electricity, but different fuels dominate electricity generation in different states. For example, Indiana was
       the 11th-largest electricity generator in 2009, with coal accounting for 93% of its generation. California
       was the 4th-largest electricity generator, but coal accounted for just 1% of its generation. Generators in
       California, the Pacific Northwest, and much of New England don’t burn much coal, while those in the
       Midwest, Southeast, and Southwest burn much more (see map below). All else equal, hot summer
       weather in areas that rely heavily on coal-fired generation means more coal shipments.

          Average Weekly U.S. Rail Carloads of Coal                                                       % Change in U.S. Rail Carloads of Coal From Same
160,000                                                                                                      Month Previous Year: Jan. 2006 - June 2010
                                                                                                       15%
                                                                    2008
150,000                                    2006                                                        10%

                                                                                                          5%
140,000
                                                                                                          0%
                                            2007                                                                                                                                            (down 0.1%)
130,000                                                                                                   -5%
                           2010                                   2009                                                     June 2010 was up 2.1%
                                                                                                      -10%
120,000                                                                                                                    from June 2009 and down
                                                                                                      -15%                 5.0% from June 2008.

110,000
                                                                                                      -20%
              Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                                         2006              2007              2008              2009              2010
  Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.        Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
  operations of CN and CP, and reflect revisions from original reporting. Source: AAR                   CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic



     Average Weekly Canadian Rail Carloads of Coal                                                      % Change in Canadian Carloads of Coal From Same
10,000                                                                                                     Month Previous Year: Jan. 2006 - June 2010
                                                                                                       60%
                                                    2007                                               50%
  9,000                                                                                                                             June 2010 was up 8.8% from June
                                                                                                       40%                          2009 and up 2.3% from June 2008.
  8,000                                                                                                30%
                                                                                                       20%
  7,000
                                  2010                                     2006                        10%

  6,000                                                                                                   0%

                                             2009                                 2008                -10%
  5,000                                                                                               -20%
                                                                                                      -30%
  4,000
                                                                                                      -40%
            Jan Feb Mar Apr May Jun                     Jul Aug Sep Oct Nov Dec                                      2006              2007              2008              2009             2010
Data are weekly average originations for each month, are not seasonally adjusted, include CN and CP   Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.
(including their U.S. operations), and reflect revisions from original reporting. Source: AAR         operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




                                                                                                                                 Coal-Fired Generation as a % of
                                                                                                                                 Total Electricity Generation


                                                                                                                                              0% to 20%

                                                                                                                                              20% to 40%

                                                                                                                                              40% to 60%

                                                                                                                                              60% to 80%

                                                                                                                                              80% to 100%




       Rail Time Indicators – July 13, 2010                                                                                                                                    Page 9 of 31
                                                                          Association of American Railroads



                                                                                          CHEMICALS
              U.S. rail carloads of chemicals rose 11.6% in June 2010 over June 2009, the seventh straight
     double-digit yearl-over-year monthly increase. However, weekly average chemical carloads in June 2010
     on U.S. railroads of 28,437 were down for the second straight month. Carloads on Canadian carriers
     have fallen for two straight months as well. As the chart on the bottom left shows, ethanol (which is
     considered a chemical) is a small but rapidly growing commodity for railroads. In 2008 (the most recent
     year for which data are available), railroads hauled more than 220,000 carloads of ethanol, up from fewer
     than 40,000 in 2000. Railroads account for about two-thirds of ethanol shipments.

     Average Weekly U.S. Rail Carloads of Chemicals                                                      % Change in U.S. Rail Carloads of Chemicals From
33,000                                                                                                   Same Month Previous Year: Jan. 2006 - June 2010
32,000                                                                                                 20%
31,000                                                                            2007                 15%
30,000                                                                                                 10%
29,000
                                                                                                        5%
28,000                            2010
                                                 2006                                                   0%
27,000
                                                                                                       -5%
26,000
25,000                                 2009                                                           -10%
                                                                           2008                                        June 2010 was up 11.6%
24,000                                                                                                -15%             from June 2009 and down
23,000                                                                                                                 6.7% from June 2008.
                                                                                                      -20%
22,000
                                                                                                      -25%
              Jan Feb Mar Apr May Jun                   Jul Aug Sep Oct Nov Dec                                      2006              2007              2008              2009              2010
  Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.       Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
  operations of CN and CP, and reflect revisions from original reporting. Source: AAR                  CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic



   Avg. Weekly Canadian Rail Carloads of Chemicals                                                      % Change in Canadian Carloads of Chemicals From
17,000                                                                                                  Same Month Previous Year: Jan. 2006 - June 2010
                  2010                                                                                 50%
16,000                                           2007
                                                                                                       40%                                 June 2010 was up 23.9%
15,000                                                                                                                                     from June 2009 and down
                                                                                                       30%
                                                                                                                                           5.9% from June 2008.
14,000                                                                                                 20%
                                2006
13,000                                                                                                 10%

12,000                              2009                                                                0%
                                                                                  2008
                                                                                                      -10%
11,000
                                                                                                      -20%
10,000
                                                                                                      -30%
  9,000
                                                                                                      -40%
              Jan Feb Mar Apr May Jun                   Jul Aug Sep Oct Nov Dec                                      2006              2007             2008              2009              2010
Data are weekly average originations for each month, are not seasonally adjusted, include CN and CP   Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.
(including their U.S. operations), and reflect revisions from original reporting. Source: AAR         operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic



                        U.S. Rail Carloads of Ethanol                                                                   U.S. Rail Carloads of Ethanol
250,000                                                                                                        vs. U.S. Ethanol Production (Index 2002=100)
                                                                                                      500
225,000
                                                                                                      450
200,000
                                                                                                      400
175,000
                                                                                                      350
150,000
                                                                                                      300
125,000
                                                                                                      250
                                                                                                                                Ethanol production
100,000
                                                                                                      200
  75,000                                                                                              150
  50,000                                                                                                                                                      RR carloads of ethanol
                                                                                                      100
  25,000                                                                                                50
          0                                                                                              0
               2000      2001     2002        2003   2004     2005      2006      2007     2008          2002            2003           2004           2005          2006           2007           2008
              Source: STB Waybill Sample                                                                  Source: Association of American Railroads, Renewable Fuels Association




     Rail Time Indicators – July 13, 2010                                                                                                                                   Page 10 of 31
                                                                           Association of American Railroads



                                                                                                   GRAIN
               U.S. railroads averaged 19,202 carloads of grain per week in June 2010, the lowest such figure in
       a year but still ahead of last year by 12%. In last month’s Rail Time Indicators we noted the importance of
       grain exports. The U.S. is the world’s top grain exporter, with nearly half the U.S. wheat crop, around
       40% of soybeans and around 15% of corn exported. The chart on the bottom left, from USDA, shows
       weekly U.S. rail carloads of grain to port in 2009 and 2010. Note the decline in the second quarter of
       2010, which helps explain the decline in total U.S. grain carloads over the past three months.

          Average Weekly U.S. Rail Carloads of Grain                                                     % Change in U.S. Rail Carloads of Grain From Same
 28,000                                                                                                     Month Previous Year: Jan. 2006 - June 2010
                                                                 2007
                                                                                                        30%
 26,000
                                                                                                        20%
 24,000                                     2006
                                                                                                        10%
 22,000
                                                                                                           0%

 20,000
                                                                               2008
                                                                                                       -10%

 18,000                                      2010                                                                    June 2010 was up 11.9%
                       2009                                                                            -20%          from June 2009 and down
                                                                                                                     12.3% from June 2008.
 16,000
                                                                                                       -30%
             Jan Feb Mar Apr May Jun                      Jul Aug Sep Oct Nov Dec                                     2006              2007             2008              2009              2010
  Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.        Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
  operations of CN and CP, and reflect revisions from original reporting. Source: AAR                   CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




     Average Weekly Canadian Rail Carloads of Grain                                                     % Change in Canadian Carloads of Grain From Same
 12,000                                                                                                     Month Previous Year: Jan. 2006 - June 2010
                                                                                                        30%
                                                                                                        25%                                  June 2010 was down 18.1% from June
 11,000                                                                                                                                      2009 and down 3.1% from June 2008.
                                 2010                                                                   20%
                                                                                                        15%
 10,000                                            2009
                                                                                                        10%
                                                                                                         5%
  9,000
                                                                                                         0%
                                  2006                                      2008
                                                                                                        -5%
  8,000                   2007
                                                                                                       -10%
                                                                                                       -15%
  7,000
                                                                                                       -20%
             Jan Feb Mar Apr May Jun                      Jul Aug Sep Oct Nov Dec                                     2006              2007              2008             2009              2010
Data are weekly average originations for each month, are not seasonally adjusted, include CN and CP   Data are based on originations, are not seasonally adjusted, include CN and CP (including their U.S.
(including their U.S. operations), and reflect revisions from original reporting. Source: AAR         operations), and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




      Weekly U.S. Rail Carloads* of Grain to U.S. Ports:                                                                Rail Grain Tonnage by Movement Type
                 January 2009 - June 2010                                                              70%
11,000                                                                                                              The percentage of U.S. rail grain
10,000                                                                                                 60%          traffic moving in highly efficient unit
                                                                                                                    trains has been increasing over the
  9,000
                                                                                                       50%          years, reaching 60% in 2008.
  8,000
  7,000                                                                                                40%
  6,000
  5,000                                                                                                30%
  4,000
                                                                                                       20%
  3,000
  2,000                                                                                                10%
                                                                                                                  1985
                                                                                                                  1990
                                                                                                                  1995
                                                                                                                  2000
                                                                                                                  2005
                                                                                                                  2006
                                                                                                                  2007
                                                                                                                  2008


                                                                                                                                                1985
                                                                                                                                                1990
                                                                                                                                                1995
                                                                                                                                                2000
                                                                                                                                                2005
                                                                                                                                                2006
                                                                                                                                                2007
                                                                                                                                                2008


                                                                                                                                                                              1985
                                                                                                                                                                              1990
                                                                                                                                                                              1995
                                                                                                                                                                              2000
                                                                                                                                                                              2005
                                                                                                                                                                              2006
                                                                                                                                                                              2007
                                                                                                                                                                              2008




  1,000
      0                                                                                                 0%
                        January-December 2009                         January-June 2010                               Single Cars                  Multiple Cars                   Unit Trains
                                                                                                                       (1-5 cars)                   (6-49 cars)                    (50+ cars)
            Data are 4 week moving averages and exclude cross-border to Mexico.
            Source: USDA Grain Transportation Report                                                              Source: STB Waybill Sample




       Rail Time Indicators – July 13, 2010                                                                                                                                   Page 11 of 31
                                                                          Association of American Railroads



                                                   ALL COMMODITIES EXCLUDING COAL AND GRAIN

             Average Weekly U.S. Rail Carloads:                                                     % Change in U.S. Rail Carloads Excl. Coal and Grain
         All Commodities Excluding Coal and Grain                                                   From Same Month Prev. Year: Jan. 2006 - June 2010
200,000                                                                                             30%
                                                                                                    25%
190,000
                     2006                                                                           20%                                 June 2010 was up 19.6%
180,000                                                               2007
                                                                                                    15%                                 from June 2009 and down
170,000                                                                                             10%                                 14.1% from June 2008.
160,000                                                                                              5%
                                                                                                     0%
150,000
                                                                                                    -5%
140,000          2010                                                  2008                        -10%
130,000                                                                                            -15%
                                    2009
120,000                                                                                            -20%
                                                                                                   -25%
110,000
                                                                                                   -30%
100,000
                                                                                                   -35%
            Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                                      2006             2007              2008              2009              2010
  Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.     Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
  operations of CN and CP, and reflect revisions from original reporting. Source: AAR                CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic



                                                        PRIMARY METAL PRODUCTS (MAINLY STEEL)

             Average Weekly U.S. Rail Carloads                                                       % Change in U.S. Rail Carloads of Steel and Other
         of Steel and Other Primary Metal Products                                                  Primary Metal Products From Same Month Previous
16,000                                                                                                         Year: Jan. 2006 - June 2010
                                                                                                   100%
14,000                                                                             2006
                                                                                                   80%
                                                                                                                                 June 2010 was up 78.5%
12,000                                                                                             60%                           from June 2009 and down
                 2010                                                                                                            22.3% from June 2008.
10,000                                                 2007                                        40%
                                                                   2008
                                                                                                   20%
 8,000
                                   2009                                                             0%
 6,000                                                                                             -20%

 4,000                                                                                             -40%
                                                                                                   -60%
 2,000
                                                                                                   -80%
           Jan Feb Mar Apr May Jun                    Jul Aug Sep Oct Nov Dec                                    2006             2007              2008                              2010
                                                                                                                                                                     2009
 Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.    Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
 operations of CN and CP, and reflect revisions from original reporting. Source: AAR               CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




         WASTE & SCRAP MATERIALS (SCRAP STEEL, SCRAP PAPER, CONSTRUCTION DEBRIS, ETC.)

                Average Weekly U.S. Rail Carloads                                                      % Change in U.S. Rail Carloads of Waste and
                  of Waste and Scrap Materials                                                       Scrap Materials From Same Month Previous Year:
12,000                                                                                                             Jan. 2006 - June 2010
                                                                                                    60%
11,000
                                                                                   2007             50%                                June 2010 was up 23.3%
10,000                                                                                              40%                                from June 2009 and down
 9,000                  2006                                                                        30%                                20.8% from June 2008.
                                                                                                    20%
 8,000                             2010                                                             10%
 7,000                                                                                               0%
                                                                                                   -10%
 6,000
                                              2009                                                 -20%
 5,000                                                                        2008                 -30%
                                                                                                   -40%
 4,000
                                                                                                   -50%
           Jan Feb Mar Apr May Jun                     Jul Aug Sep Oct Nov Dec                                   2006             2007              2008                               2010
                                                                                                                                                                     2009
 Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.    Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
 operations of CN and CP, and reflect revisions from original reporting. Source: AAR               CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




     Rail Time Indicators – July 13, 2010                                                                                                                                Page 12 of 31
                                                                            Association of American Railroads



           PETROLEUM PRODUCTS (LPGs, ASPHALT PRODUCTS, FUEL OIL, LUBRICATING OIL, ETC.)

                 Average Weekly U.S. Rail Carloads                                                % Change in U.S. Rail Carloads of Petroleum Products
                      of Petroleum Products                                                               From Same Month Previous Year:
7,500                                                                                                            Jan. 2006 - June 2010
                                                       2007                                       20%
7,000                                                                       2006
                                                                                                  15%
6,500                                                                                             10%

6,000                                                                                              5%
                                                         2008
                                                                                                   0%
5,500
                                                                                                   -5%
5,000                                               2009                                          -10%          June 2010 was up 5.1%
                                 2010
                                                                                                  -15%          from June 2009 and down
4,500
                                                                                                                6.6% from June 2008.
                                                                                                  -20%
4,000
                                                                                                  -25%
          Jan Feb Mar Apr May Jun                       Jul    Aug Sep Oct Nov Dec                              2006              2007              2008              2009              2010
 Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.   Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
 operations of CN and CP, and reflect revisions from original reporting. Source: AAR              CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic



                                                                CRUSHED STONE, SAND, AND GRAVEL

                Average Weekly U.S. Rail Carloads                                                  % Change in U.S. Rail Carloads of Crushed Stone,
               of Crushed Stone, Sand, and Gravel                                                  Sand, and Gravel From Same Month Previous Year:
28,000                                                                                                           Jan. 2006 - June 2010
26,000                   2006                                     2007                             30%
                                                                                                   25%
24,000
                                                                                                   20%
22,000                                                                                             15%
20,000                                                                                             10%
                                                                                                    5%
18,000
                                                                             2008                   0%
16,000                                                                                             -5%
14,000                                                                                            -10%
                                    2009                                                          -15%
12,000
                       2010
                                                                                                  -20%
10,000                                                                                            -25%       June 2010 was up 20.7% from June
                                                                                                             2009 and down 9.6% from June 2008.
 8,000                                                                                            -30%
                                                                                                  -35%
           Jan Feb Mar Apr May Jun                      Jul Aug Sep Oct Nov Dec                                  2006                                2008
                                                                                                                                   2007                                2009              2010
 Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S.    Data are based on originations, are not seasonally adjusted, exclude U.S. operations of CN and
 operations of CN and CP, and reflect revisions from original reporting. Source: AAR               CP, and reflect revisions to original reporting. Source: AAR Weekly Railroad Traffic




                                                                       MOTOR VEHICLES AND PARTS

           Combined U.S. + Canadian                                                               % Change in Combined U.S. + Canadian Rail Carloads
  Average Weekly Rail Carloads of Motor Vehicles*                                                 of Motor Vehicles* From Same Month Previous Year:
35,000                                                                                                           Jan. 2006 - June 2010
                                   2006                                                           70%
32,000
                                                                                    2007
29,000                                                                                            50%                                  June 2010 was up 51.1%
26,000                                                                                                                                 from June 2009 and down
                                                                                                  30%
                                                                                                                                       21.0% from June 2008.
23,000
                                                                                                  10%
20,000            2010           2008
                                                                                                  -10%
17,000
                                          2009
14,000                                                                                            -30%

11,000                                                                                            -50%
 8,000                                                                                            -70%
           Jan Feb Mar Apr May Jun                      Jul Aug Sep Oct Nov Dec                                 2006              2007               2008              2009              2010
*Includes parts. Data are weekly average originations for each month, are not seasonally          *Includes parts. Data are based on originations, are not seasonally adjusted, and reflect revisions
adjusted, and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic      from original reporting. Source: AAR Weekly Railroad Traffic




     Rail Time Indicators – July 13, 2010                                                                                                                                Page 13 of 31
                                                                       Association of American Railroads



                                                  METALLIC ORES (OVERWHELMINGLY IRON ORE)

             Combined U.S. + Canadian                                                           % Change in Combined U.S. + Canadian Rail Carloads
     Average Weekly Rail Carloads of Metallic Ores                                               of Metallic Ores From Same Month Previous Year:
26,000                                                                                                          Jan. 2006 - June 2010
24,000                                                                           2007           220%
22,000                2006                                                                      200%
                                                                                                180%
20,000                                                                                          160%
18,000                                                                                          140%                          June 2010 was up 148.7% from
16,000                                                                                          120%                          depressed June 2009 levels and
                                   2010                                                         100%                          down 13.7% from June 2008.
14,000
                                                                                                 80%
12,000                                                                                2008       60%
10,000                                                                                           40%
 8,000                                                                                           20%
                                                           2009                                   0%
 6,000                                                                                          -20%
 4,000                                                                                          -40%
 2,000                                                                                          -60%
                                                                                                -80%
           Jan Feb Mar Apr May Jun                     Jul Aug Sep Oct Nov Dec                                2006              2007               2008              2009              2010
Data are weekly average originations for each month, are not seasonally adjusted, and reflect           Data are based on originations, are not seasonally adjusted, and reflect revisions to original
revisions from original reporting. Source: AAR Weekly Railroad Traffic                                  reporting. Source: AAR Weekly Railroad Traffic




                                 LUMBER AND WOOD PRODUCTS + PRIMARY FOREST PRODUCTS

  Combined U.S. + Canadian Average Weekly Rail                                                  % Change in Combined U.S. + Canadian Rail Carloads
  Carloads of Lumber and Primary Forest Products                                                 of Lumber and Primary Forest Products From Same
18,000                                                                                               Month Previous Year: Jan. 2006 - June 2010
                                                                                                20%
16,000
                                                                                                                   June 2010 was up 6.9% from June
                                                                                   2006         10%
14,000                                                                                                             2009 and down 25.7% from June 2008.

                            2007                                                                 0%
12,000

10,000                                                                                          -10%
                                             2010
                                                                     2008
 8,000                                                                                          -20%

 6,000                          2009                                                            -30%

 4,000
                                                                                                -40%
           Jan Feb Mar Apr May Jun                     Jul Aug Sep Oct Nov Dec                               2006              2007               2008               2009              2010
   Data are weekly average originations for each month, are not seasonally adjusted, and               Data are based on originations, are not seasonally adjusted, and reflect revisions to original
   reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic                      reporting. Source: AAR Weekly Railroad Traffic




                                                                     PULP AND PAPER PRODUCTS

         Combined U.S. + Canadian Average Weekly                                                % Change in Combined U.S. + Canadian Rail Carloads
          Rail Carloads of Pulp and Paper Products                                                 of Pulp and Paper Products From Same Month
15,000                                                                                                  Previous Year: Jan. 2006 - June 2010
                                                                                                 5%
14,000                                                                             2006
                                                                                                 0%
13,000
                                                                                                -5%
12,000
                                                                                                -10%
11,000                                                                                2007
                                                    2009                                        -15%          June 2010 was up 0.4%
                 2010                                                2008
10,000                                                                                                        from June 2009 and down
                                                                                                -20%          19.9% from June 2008.
 9,000
                                                                                                -25%
 8,000                                                                                          -30%
           Jan Feb Mar Apr May Jun                     Jul Aug Sep Oct Nov Dec                               2006              2007               2008              2009               2010
   Data are weekly average originations for each month, are not seasonally adjusted, and           Data are based on originations, are not seasonally adjusted, and reflect revisions to original
   reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic                  reporting. Source: AAR Weekly Railroad Traffic




  Rail Time Indicators – July 13, 2010                                                                                                                             Page 14 of 31
                                                                         Association of American Railroads



                                                             SEASONALLY ADJUSTED RAIL TRAFFIC


            Average Weekly Total U.S. Rail Carloads                                                       Average Weekly U.S. Rail Intermodal Traffic
                  January 2006 - June 2010                                                                        January 2006 - June 2010
375,000                                                                                          260,000

350,000
                                                                                                 240,000
325,000                                                                                                                                                        Seasonally adjusted
                                                               Seasonally adjusted
                                                                                                 220,000
300,000

275,000                     Unadjusted                                                           200,000                 Unadjusted

250,000
                                                                                                 180,000
225,000
                   Seasonally adjusted U.S. rail carloads were                                                   Seasonally adjusted U.S. rail intermodal was
                                                                                                 160,000
200,000            down 1.3% in June 2010 from May 2010.                                                         down 1.1% in June 2010 from May 2010.

175,000                                                                                          140,000
                 2006             2007            2008            2009             2010                          2006             2007            2008             2009            2010
 Data are weekly average originations for each month, exclude U.S. operations of CN and CP,      Data are weekly average originations for each month, exclude U.S. operations of CN and CP, and
 and reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic              reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic




      Average Weekly Total Canadian Rail Carloads                                                   Average Weekly Canadian Rail Intermodal Traffic
               January 2006 - June 2010                                                                       January 2006 - June 2010
90,000                                                                                           60,000
85,000                                                                                           55,000
                                                          Seasonally adjusted
80,000                                                                                                                                                       Seasonally adjusted
                                                                                                 50,000
75,000
70,000                                                                                           45,000

65,000                           Unadjusted                                                      40,000
60,000                                                                                                                         Unadjusted
                                                                                                 35,000
55,000
                                                                                                 30,000
50,000                                                                                                         Seasonally adjusted Canadian rail intermodal
               Seasonally adjusted Canadian rail carloads
45,000                                                                                           25,000        was up 1.6% in June 2010 from May 2010.
               were up 1.1% in June 2010 from May 2010.
40,000                                                                                           20,000
                2006            2007             2008             2009             2010                         2006             2007             2008            2009             2010
Data are weekly average originations for each month, exclude U.S. operations of CN and CP, and   Data are weekly average originations for each month, exclude U.S. operations of CN and CP, and
reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic                   reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic




          Average Weekly U.S. Rail Carloads of Coal                                               Avg. Weekly U.S. + Canadian Rail Carloads of Motor
                  January 2006 - June 2010                                                             Vehicles and Parts: Jan. 2006 - June 2010
160,000                                                                                          40,000

                                                                                                 35,000
150,000
                                                                Seasonally adjusted              30,000
140,000                                                                                                                                             Seasonally adjusted
                                                                                                 25,000

130,000                                                                                          20,000
                                Unadjusted                                                       15,000                    Unadjusted
120,000
                                                                                                 10,000
110,000           Seasonally adjusted U.S. coal carloads were                                                 Seasonally adjusted U.S. + Canadian carloads of motor
                  down 1.2% in June 2010 from May 2010.                                           5,000       vehicles were down 9.0% in June 2010 from May 2010.
100,000                                                                                               0
                2006             2007             2008            2009             2010                         2006             2007             2008            2009             2010
Data are weekly average originations for each month, exclude U.S. operations of CN and CP, and   Data are weekly average originations for each month, exclude U.S. operations of CN and CP, and
reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic                   reflect revisions from original reporting. Source: AAR Weekly Railroad Traffic




      Where to go for more information:
      •              Weekly AAR press releases on railroad traffic are available on the AAR web site here.




      Rail Time Indicators – July 13, 2010                                                                                                                           Page 15 of 31
                                                                   Association of American Railroads



      GROSS DOMESTIC PRODUCT (GDP)
      Who releases it and when?
      •            U.S. Bureau of Economic Analysis (BEA), measured quarterly and revised several times as better
                   data become available.

      What is it and why is it important?
      •            GDP (the output of goods and services produced by labor and property located in a country)
                   measures the size of an economy and how fast it’s growing. Assuming it’s measured accurately,
                   it’s 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 — i.e., take the percentage change in real GDP from one
                   quarter to the next and multiply by four.
      •            In the United States, GDP and freight rail traffic have historically been closely correlated (see
                   chart on next page and discussion below).

      What are the latest numbers?
      •            U.S. GDP grew at an annualized rate of 2.7% in Q1 2010 over Q4 2009 according to the BEA’s
                   “third estimate” released on June 25. (The first estimate, released April 30, was 3.2%; the next
                   estimate, released May 27, was 3.0%.)
      •            As noted in the March 2010 Rail Time Indicators, some economists think that “final sales to
                   domestic purchasers” (a subset of GDP that excludes inventory and trade) is a better gauge of
                   U.S. economic activity than overall GDP. This measure, which tracks how much U.S. residents
                   spend, rose an uninspiring 1.6% in Q1 2010, following an even less impressive 1.4% increase in
                   Q4 2009 (see chart below right).


        Real U.S. GDP Growth: Q1 2004 – Q2 2011                                                      Final Sales to Domestic Purchasers
      (annualized % change from previous quarter)                                                (annualized % change from previous quarter)
8%                                                                                         8%
                                                                   Actual
6%                                                                                         6%

4%                                                                                         4%

2%                                                                                         2%

0%                                                                                         0%

-2%                                                                                        -2%
                                                                               Forecast
-4%        Estimates for Q2 2010 to Q2 2011 are the                                        -4%
           consensus forecast by around 50 leading
-6%        economists surveyed by The Wall Street                                          -6%
           Journal in early June 2010.
-8%                                                                                        -8%
          2004     2005       2006       2007         2008     2009          2010    '11          2004        2005       2006          2007   2008      2009   2010
      Source: Bureau of Economic Analysis, Wall Street Journal forecasters                       Source: Bureau of Economic Analysis




      •            In last month’s Rail Time Indicators we included a chart (repeated with a few modifications on the
                   top of the next page) showing the positive correlation since 2000 by quarter between year-over
                   year rail traffic and year-over-year U.S. GDP. The correlation between the two from Q1 2000
                   through Q1 2010 is 88%. That’s not a perfect 100%, but it is very strong, and our guess is that
                   this correlation is stronger than the typical correlation between GDP growth and other individual
                   economic indicators. Plus, rail traffic data are more timely than most other economic indicators.
                   (If you know of a specific economic indicator that has a stronger correlation to GDP than 88%
                   since 2000 and is as timely or nearly as timely as rail traffic, let us know and we’ll mention it in
                   future Rail Time Indicators.)




      Rail Time Indicators – July 13, 2010                                                                                                           Page 16 of 31
                                        Association of American Railroads



•        As of this writing, we don’t know what              U.S. GDP* vs. Total U.S. Rail Traffic** by Quarter
         Q2 2010 GDP will be, but we do know           6%                                                                                     16%
         Q2 rail traffic. The chart at right shows                 bars = GDP (left scale)         line = rail traffic (right scale)
                                                       5%                                                                                     12%
         that in Q2 2010, U.S. rail traffic (defined
                                                       4%                                                                                     8%
         as carloads plus intermodal trailers and
         containers) was 15.4% higher than in          3%                                                                                     4%

         Q2 2009. If the 88% correlation that          2%                                                                                     0%
         held from Q1 2000 to Q1 2010 held for         1%                                                                                     -4%
         another quarter, Q2 2010 GDP would            0%                                                                                     -8%
                                                                 *GDP = year-over-year % change in real GDP
         be 5.0% higher than Q2 2009 GDP,              -1%                                                                                    -12%
                                                                 **Rail Traffic = year-over-year % change in
         which translates to 9.3% higher than Q1       -2%       quarterly carloads+intermodal units                                          -16%
         2010 GDP. (Remember, the GDP                  -3%                                                                                    -20%
         number you read about in the paper is         -4%
                                                                     correlation = 88%
                                                                                                                                              -24%
         the annualized change in GDP from one                2000    2001   2002    2003   2004   2005   2006   2007   2008    2009   2010
         quarter to the next, not year-over-year.)           Source: Bureau of Economic Analysis, AAR Weekly Railroad Traffic

•        If the BEA announced on July 30 (when
         preliminary Q2 2010 GDP numbers will be released) that U.S. GDP grew 9.3% in the Q2 2010,
         nobody would believe it. Still, there’s a reason why a well known investor from Omaha has said
         that, if he were stranded on a desert island and could only have access to a few economic
         indicators, rail freight data would be one of them. As the chart above shows, when railroads are
         doing well, the economy probably is too, and vice-versa.
•        An excellent story a few weeks ago from Bloomberg (see here) examined the relationship
         between GDP growth and rail carloads of various individual commodities. Bloomberg’s analysis
         found that waste and scrap had the highest
         correlation with economic growth among the various
         commodities.                                                Correlation Between Quarterly GDP
                                                                                    Growth and Rail Traffic by Commodity
•        Intuitively that makes sense. Waste and scrap                                       Q1 2000 - Q1 2010
         consists mainly of scrap iron, municipal and
         demolition waste, and scrap paper. Scrap iron is used                  Commodity                                       Correlation
         to make steel, an input for a huge variety of products                 Grain                                                  56%
         (cars, appliances, machine tools, etc.) that people are                Farm products excl. grain                              43%
         more likely to buy when the economy is healthy.                        Metallic ores                                          62%
         Likewise, municipal waste and demolition material and                  Coal                                                   42%
         debris are produced when people throw things out or                    Crushed stone, gravel, sand                            74%
                                                                                Nonmetallic minerals                                   42%
         build or rebuild something, which is also more likely to
                                                                                Grain mill products                                    41%
         happen when the economy is growing.                                    Food products                                          67%
•        Using a slightly different methodology and a more                      Primary forest products                                71%
         refined data set, we found that petroleum products                     Lumber & wood products                                 74%
                                                                                Pulp & paper products                                  76%
         actually has a slightly higher correlation with GDP
                                                                                Chemicals                                              65%
         (correlation = 82% from Q1 2000 through Q1 2010)                       Petroleum products                                     82%
         than waste and scrap (correlation = 79%). Petroleum                    Stone, clay, & glass prod.                             79%
         products consists largely of liquefied petroleum gases,                Coke                                                   61%
         asphalt, various lubricating and other oils, propane,                  Primary metal products                                 77%
         and various related products.                                          Motor vehicles & parts                                 74%
                                                                                Waste & scrap materials                                79%
•        The table on the right shows the correlation between                   Total carloads                                         87%
         GDP and various rail commodities since 2000. Note                      Total intermodal                                       82%
         that no single commodity has a stronger                                Total cars + intermodal                                88%
         correlation to GDP than rail traffic as a whole.                       Source: AAR Weekly Railroad Traffic , BEA

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 estimate of Q2 2010 GDP on July 30.




Rail Time Indicators – July 13, 2010                                                                                            Page 17 of 31
                                                                  Association of American Railroads



     PURCHASING MANAGERS INDEX (PMI)
     Who releases it and when?
     •            Institute for Supply Management (ISM – formerly the National Association of Purchasing
                  Managers), near the beginning of each month.

     What is it and why is it important?
     •            The PMI combines data on new orders, inventory, production, supplier deliveries, and
                  employment. It’s based on a survey of several hundred supply managers at manufacturers
                  throughout the country. Supply managers typically handle purchasing/procurement, inventory
                  control and management, and physical distribution and warehousing. The PMI is considered an
                  indicator both of actual “on-the-ground” conditions as well as near- to medium-term sentiment.
     •            Manufacturing accounts for approximately 12% of U.S. GDP — not as much as it used to be, but
                  the U.S. is still the world’s top manufacturer. In fact, by itself, U.S. manufacturing would still be
                  around the eighth largest economy in the world. And, of course, much of what railroads haul
                  consists of raw materials for manufacturing or finished manufactured goods.
     •            According to the ISM, a PMI > 50 indicates that overall manufacturing is expanding; a PMI <
                  50 indicates that manufacturing is contracting. Also according to the ISM, a PMI greater than
                  41.2, over time, generally indicates an expansion of the overall economy.

     What are the latest numbers?
     •            PMI retreated to 56.2 in June 2010 from 59.7 in May 2010, the biggest decline since December
                  2008. The PMI was 45.3 in June 2009. The new orders component of PMI fell sharply to 58.5
                  in June 2010 from 65.7 in both May 2010 and April 2010. It was 49.9 in June 2009.
     •            What the ISM said about the June PMI: "The lower reading for the PMI came from a slowing in
                  the New Orders and Production Indexes. We are now 11 months into the manufacturing
                  recovery, and given the robust nature of recent growth, it is not surprising that we would see a
                  slower rate of growth at this time. The sector appears to be solidly entrenched in the recovery.
                  Comments from the respondents remain generally positive, but expectations have been that the
                  second half of the year will not be as strong in terms of the rate of growth, and June appears to
                  validate that forecast."

                    Purchasing Managers Index:                                            PMI vs. the Next Month's U.S. Rail Carloadings
                     January 2005 - June 2010                                              Excluding Coal and Grain* (Jan. 2005 = 100)
70                                                                                  110
65                                      New Orders Component
                                                                                    100                                        Next Month's Rail Carloads
60
55                                                                                   90
50
                                                                                     80
45
40                                                                                   70                              PMI
35                      Overall PMI
                                                                                     60
30
25                                                                                   50
20                                                                                            2005           2006           2007           2008           2009           2010
         2005         2006            2007        2008          2009         2010   *Jan. 2005 PMI vs. Feb. 2005 rail carloads, etc., so carloads are always one month behind. Data
                                                                                    are seasonally adjusted. Carloads exclude U.S. operations of CN and CP. Sources: ISM, AAR
     Data are seasonally adjusted. Source: Institute for Supply Management



     Where to go for more information:
     •            The press release and much more information regarding the June PMI are here. The July PMI
                  will be released on August 2, 2010.




     Rail Time Indicators – July 13, 2010                                                                                                              Page 18 of 31
                                                                  Association of American Railroads



       MANUFACTURING INVENTORIES AND SALES
       Who releases it and when?
       •           The U.S. Census Bureau, near the beginning of each month, covering the month two months
                   prior. (E.g., the report released in early July has data covering May.)

       What is it and why is it important?
       •           The report is based on data reported from manufacturing establishments with $500 million or
                   more in annual shipments covering 89 industry categories. Figures are seasonally adjusted.
       •           Manufacturers don’t want to hold too much inventory because it costs money to store it and it
                   can become obsolete or spoil. Moreover, inventory earns no return on investment. But
                   manufacturers don’t want too little inventory either, or they could lose sales. Like Goldilocks,
                   they want an inventory level that’s “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 becomes 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 fell 1.3% in May 2010 from April 2010 while manufacturing inventories
                   fell 0.4% (see chart below left). The resulting inventory-sales ratio for manufacturing rose
                   0.9% in May 2010 to 1.25 (see chart below right).


 Manufact. Sales & Inventories: Jan. 2005 - May 2010                                        Inventory-Sales Ratio for Manufacturing:
                                 ($ Billions)                                                       January 2005 - May 2010
$600                                                                               1.5
$575
            Manufacturing inventories                                                         The inventory-sales ratio for U.S.
$550                                                                               1.4        manufacturing rose 0.9% in May
$525                                                                                          2010 from April 2010.

$500
                                                                                   1.3
$475
$450
                                                                                   1.2
$425
$400
$375                       Manufacturing sales                                     1.1

$350
$325                                                                               1.0
           2005       2006         2007          2008        2009      2010                 2005         2006         2007         2008         2009        2010
       Data are seasonally-adjusted. Source: U.S. Census Bureau                          Data are seasonally-adjusted. Source: U.S. Census Bureau




       •           As of May, there’s still a pretty large gap between the manufacturing inventory-sales ratio and rail
                   carloadings. (See the chart on the top of the next page. For this chart we use “carloads
                   excluding coal” because it results in a stronger correlation than “total carloads” or “total carloads
                   plus intermodal units”.) It remains to be seen if this represents a “new normal” or if, in time, the
                   gap will disappear. For the gap to go away, rail carloads have to increase, manufacturing sales
                   have to increase, manufacturing inventories have to fall, or some combination thereof.

       Where to go for more information:
       •           The Census Bureau’s full report on manufacturing sales and inventories in May is here. Figures
                   for June 2010 will be released on August 3, 2010.



       Rail Time Indicators – July 13, 2010                                                                                                         Page 19 of 31
                                                                        Association of American Railroads



      INDUSTRIAL PRODUCTION                                                                         Manufacturing Inventory-Sales Ratio vs.
                                                                                                        Rail Carloads Excluding Coal*
      Who releases it and when?                                                                                         (Index Jan. 2005 = 100)
                                                                                       130
      •            The U.S. Federal Reserve Board,                                                                  Mfr. Inventory-Sales Ratio
                                                                                       120
                   around the middle of each month.
                                                                                       110
      What is it and why is it important?                                              100
                                                                                        90
      •            Industrial production figures are based
                                                                                        80
                   on the monthly raw volume of goods                                                                              Rail Carloads
                   produced by U.S. industrial firms such                               70
                                                                                                   correlation = -86%
                   as factories, mines, and electric utilities.                         60
                   The industrial sector generally exhibits                             50
                                                                                                   2005          2006             2007          2008           2009          2010
                   the most volatility in output during a
                   business cycle.                                                            Data are seasonally adjusted. Carloads exclude U.S. operations of CN and CP.
                                                                                              Sources: Census Bureau, AAR


      What are the latest numbers?
      •            Total industrial production rose 1.3% in May 2010, the 11th straight monthly increase and the
                   largest since July 2009. The manufacturing component of industrial production rose 1.0% in May,
                   the third straight monthly increase and tenth increase in the past 11 months. (Note: the Federal
                   Reserve recently substantially revised its historical industrial production data. The charts below
                   reflect the revisions.) Industrial production in June 2010 was 8% higher than in June 2009.


                  U.S. Industrial Production: Total                                                            Overall U.S. Industrial Production:
                     January 2005 - May 2010                                                                    % Change From Previous Month
                             (January 2005 = 100)                                                                  January 2005 - May 2010
110                                                                                          2%
                                                                                                                               post-hurricane resumption
105                                                                                          1%
                                                                Manufacturing
100                                                                                          0%
 95                                                                                          -1%

 90                Total Industrial Production                                               -2%

 85                Apr '10 to May '10: +1.3%
                                                                                             -3%
                   May '09 to May '10: +8.0%                                                                                             hurricanes
 80                                                                                          -4%

 75                                                                                          -5%
           2005        2006         2007          2008           2009         2010                      2005            2006          2007            2008          2009       2010
      Data are seasonally adjusted. Source: U.S. Federal Reserve Board                               Data are seasonally adjusted. Source: U.S. Federal Reserve Board



          U.S. Industrial Production: Select Sectors                                                   U.S. Industrial Production: Select Sectors
                   January 2005 - May 2010                                                                      January 2005 - May 2010
                           (January 2005 = 100)                                                                            (January 2005 = 100)
130                                                                                      170
120
                                                                  Chemicals              150
110                                                                                                                               RR rolling stock
100                                                                                      130
                                                                                                                                                                      Coal mining
 90                                                                                      110
                                        Wood
 80
                                                                Paper                        90
 70
                                                                                                                          Cement & concrete prod.
 60                                                                                          70
 50
                                                 Iron & steel                                50
 40                                                                                                                                        Motor vehicles & parts
 30                                                                                          30
          2005        2006         2007          2008            2009         2010                      2005            2006          2007            2008          2009       2010
      Data are seasonally adjusted. Source: U.S. Federal Reserve Board                               Data are seasonally adjusted. Source: U.S. Federal Reserve Board




      Rail Time Indicators – July 13, 2010                                                                                                                          Page 20 of 31
                                                               Association of American Railroads



  •             The bottom two charts on the previous page show the widely varying performance of various
                industrial sectors. Clearly, the iron and steel sector is not for the faint of heart. In comparison,
                the chemical industry has been the model of stability.

  Where to go for more information:
  •             The Federal Reserve release on industrial production in May is here, though data therein don’t
                match what’s above because of revisions issued by the Federal Reserve since the release was
                issued. June 2010 data will be released on July 15, 2010.


  CAPACITY UTILIZATION
  Who releases it and when?
  •             The U.S. Federal Reserve Board, around the middle of each month.

  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 in every industry (including railroads) 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
                opportunities. 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 is also undesirable.

  What are the latest numbers?
  •             Capacity utilization for total industry (mining, manufacturing, and gas and electric utilities)
                rose to 74.1% in May 2010, up from 73.1% in April 2010 and the 11th straight monthly increase.
                It was 68.3% in May 2009. (Note: the Federal Reserve recently substantially revised its historical
                data on capacity utilization. The charts below reflect the revisions.)
  •             Capacity utilization for manufacturing rose to 72.0% in May 2010 from 71.3% in April 2010.
                Over the past 11 months, it has fallen just once.


      U.S. Capacity Utilization: Jan. 2005 - May 2010                                         Overall U.S. Capacity Utilization vs.
85%                                                                                     Total U.S. Rail Carloads: Jan. 2005 - May 2010
                 Bars = Total Industry       Line = Manufacturing                                         (Index January 2005 = 100)
                                                                                  110
80%
                                                                                  105
                                                                                                                                             Total Rail
                                                                                  100                                                        Carloads
75%
                                                                                  95

                                                                                  90
70%
                                                                                  85                  Overall Capacity Utilization

65%                                                                               80

                                                                                  75        correlation = 96%
60%                                                                               70
         2005         2006         2007         2008         2009        2010               2005         2006         2007         2008         2009        2010
      Data are seasonally adjusted. Source: U.S. Federal Reserve Board                   Data are seasonally adjusted. Source: AAR, Federal Reserve Board




  Rail Time Indicators – July 13, 2010                                                                                                        Page 21 of 31
                                                                Association of American Railroads



      •           The chart on the bottom right of the previous page shows the close positive correlation between
                  capacity utilization and rail carloads. If past results are any guide (sometimes they aren’t), when
                  capacity utilization numbers for June 2010 come out on July 15 (a few days too late for this
                  edition of Rail Time Indicators), they could very well show a decline from May 2010.

          Capacity Utilization vs. U.S. Rail Carloads:                                   U.S. Capacity Utilization: Jan. 2005 - May 2010
                           Chemicals                                              110%
                        (Index January 2005 = 100)                                                        Iron & steel products
110                                                                               100%
                                                                                                                                              Coal
105                                                        Rail Carloads           90%
                                                           of Chemicals
100
                                                                                   80%
 95
                                                                                   70%
 90
                                                                                                                                             Paper
                                                                                   60%
 85            Capacity Utilization - Chemicals                                                                   Motor vehicles
                                                                                   50%
 80

 75                                                                                40%
           correlation = 83%
 70                                                                                30%
           2005        2006        2007         2008         2009          2010              2005        2006         2007         2008         2009         2010
      Data are seasonally adjusted. Source: AAR, Federal Reserve Board                    Data are seasonally adjusted. Source: U.S. Federal Reserve Board




      Where to go for more information:
      •           The Federal Reserve release on capacity utilization in May is here, though data therein don’t
                  match what’s above because of revisions issued by the Federal Reserve since the release was
                  issued. June 2010 data will be released on July 15, 2010.


      NUMBER OF EMPLOYED PERSONS AND UNEMPLOYMENT RATE
      Who releases it and when?
      •           U.S. Bureau of Labor Statistics (BLS) near the beginning of each month.

      What is it and why is it important?
      •           The figures provide a snapshot of the strength of the U.S. labor market and are based on surveys
                  of tens of thousands of households and businesses. In the United States, a gain of 150,000 or
                  more jobs from one month to the next is generally considered solid job growth. Historically,
                  125,000-150,000 has also been approximately what’s necessary to keep up with the 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
                  they’re sure an economic recovery is here to stay before making new permanent hires. In the
                  meantime, they might rely on more hours for working 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?
      •           June brought more mixed (at best) news on the employment front. Total net U.S. non-farm
                  employment fell by 125,000 in June 2010, the first monthly decline in 2010. This overall
                  decline in June reflects a 225,000 reduction in Census-related government employees and an
                  83,000 increase in private sector employment.




      Rail Time Indicators – July 13, 2010                                                                                                   Page 22 of 31
                                                                          Association of American Railroads



 Change in U.S. Private Sector Non-Farm Employment:                                                        U.S. Unemployment Rate: Jan. 2005 - June 2010*
              January 2005 - June 2010                                                                12%
        400
        300                                                                                           11%
                                                                                                                                                                  Men
        200                                                                                                       The official U.S. unemployment
                                                                                                      10%
        100                                                                                                       rate fell to 9.5% in June 2010.
                                                                                                       9%         It was 9.5% in June 2009 and
          0                                                                                                       9.7% in May 2010.
       -100                                                                                            8%
000s




       -200                                                                                                                                            Women
       -300                                                                                            7%
       -400
                                                                                                       6%
       -500
       -600                                                                                            5%
       -700                                                                                                                                                        Overall
                                                                                                       4%
       -800
       -900                                                                                            3%
                   2005          2006         2007         2008          2009         2010                       2005          2006          2007          2008          2009           2010
              Data are seasonally adjusted. Source: U.S. Bureau of Labor Statistics                         *Civilian labor force, seasonally adjusted. Source: U.S. Bureau of Labor Statistics




        •               The 83,000 gain marked the sixth straight monthly increase in private sector employment and is a
                        far cry from 2008 and 2009, when private sector employment fell in 23 out of 24 months (see
                        chart top left). Still, 83,000 was less than what most analysts expected and not much better than
                        April. It caused many to rethink their views regarding the strength of the economic recovery.
                        Until monthly private sector job growth is double or triple what it was in June, talk of a solid, self-
                        sustaining recovery should probably be considered premature.
        •               Included in June’s 83,000 new private sector jobs were 8,000 new manufacturing and health care
                        jobs, 21,000 temp jobs, and 37,000 leisure and hospitality jobs. Construction jobs fell by 22,000.
        •               The official unemployment rate fell to 9.5% in June 2010 from 9.7% in May 2010 and 9.9% in
                        April 2010, but that shouldn’t impress anybody. The unemployment rate, by definition, is the
                        number of unemployed (the numerator) divided by the labor force (the denominator). Thus, the
                        size of the labor force heavily influences the unemployment rate — everything else equal, if the
                        labor force goes up, the unemployment rate goes up; if it falls, the unemployment rate falls too.
                        In June 2010, the labor force fell by 652,000.
        •               83.9 million people (aged 16 and over) were not considered part of the labor force in June 2010.
                        That’s the highest such figure ever. 153.7 million people were part of the labor force in June
                        2010, down from a peak of 155.0 million in May 2009.
        •               The official size of the labor force                                          Net Change in the Size of the U.S. Labor Force:
                        swings wildly from one month to the                                                    January 2005 - June 2010
                        next. For example, the labor force grew                                     1000
                        by nearly 800,000 in April 2010, then                                        800
                        fell by nearly a million over the next two
                                                                                                     600
                        months (see chart at right). It makes
                                                                                                     400
                        you wonder how much of the volatility is
                        real and how much is statistical noise.                                      200
                                                                                             000s




                                                                                                       0
        •               Other factoids from the June
                                                                                                    -200
                        employment situation report:
                                                                                                    -400
                                      The number of officially             -600
                                      “discouraged” workers
                                                                           -800
                                      (persons not currently looking                 2005         2006                                   2007          2008         2009          2010
                                      for work because they believe             Data are seasonally adjusted.                           Source: U.S. Bureau of Labor Statistics
                                      no jobs are available for them)
                                      rose to 1.2 million in June 2010, the highest total ever.
                                      The average weekly hours for production and non-supervisory workers remained at 33.4
                                      in June, the same as in April and May. Average weekly hours in goods producing



        Rail Time Indicators – July 13, 2010                                                                                                                            Page 23 of 31
                                                      Association of American Railroads



                               industries fell to 40.2 in June 2010 from 40.5 in May 2010 and April 2010. Average
                               overtime hours for manufacturing workers fell for the first time in four months and
                               for only the second time since March 2009.
                               The number of long-term unemployed (27 weeks or more) fell fractionally to 6.75 million
                               in June but set a new record at 46.2% of total unemployed. It was 30.2% in June 2009
                               and 18.7% in June 2008 (see chart below left).
                               The number of temporary workers rose for the ninth straight month (see chart below
                               right). Employers often rely on temps until they’re sure that hiring additional permanent
                               employees is warranted.


    Long-Term Unemployed: Jan. 2005 - June 2010                                 Temporary Employees: Jan. 2005 - June 2010
                                     (Millions)                                                                 (Millions)
7                                                                       3.0

6                                                                       2.8
           "Long-term unemployed" are those out                         2.5
5          of work for at least 27 weeks.
                                                                        2.3
4
                                                                        2.0
3
                                                                        1.8
2
                                                                        1.5
1                                                                       1.3

0                                                                       1.0
        2005         2006          2007       2008   2009    2010                  2005          2006          2007          2008          2009       2010
    Source: U.S. Bureau of Labor Statistics                                   Data are seasonally adjusted. Source: U.S. Bureau of Labor Statistics




    •            The key question is why firms aren’t hiring more. Perhaps the best one-word reason is
                 “uncertainty” — uncertainty regarding the current and future state of the economy here and
                 abroad, and uncertainty regarding the impact of recent and future regulation and legislation
                 regarding taxes, health care, financial services, climate change, and more.

    Where to go for more information:
    •            The BLS press release on the employment situation in June 2010 is here. Data for July 2010 will
                 be released on August 6, 2010.


    CLASS I FREIGHT RAILROAD EMPLOYMENT
    Who releases it and when?
    •            Surface Transportation Board (STB), around the middle of the month.
    What is it and why is it important?
    •            Report showing the average number of Class I employees at mid-month. These numbers are not
                 seasonally adjusted. As in other industries, employment in the rail industry is in large part a
                 function of the level of business — i.e., how much freight is being hauled.

    What are the latest numbers?
    •            Class I freight railroad employment rose to 149,967 in May 2010, up 218 employees from April
                 2010. The increase was entirely due to an increase in the number of maintenance of way and
                 structures employees. (These are employees — such as bridge building employees, signalmen,
                 members of track gangs, and roadway machine operators — who keep tracks and rail rights-of-
                 way in good condition.)




    Rail Time Indicators – July 13, 2010                                                                                                 Page 24 of 31
                                                                  Association of American Railroads



Class I Railroad Employment: Jan. 2003 - May 2010                                              Change in Class I Railroad Employment
170,000
                                                                                                       From Previous Month
                                                                                      2,000

165,000                                                                               1,500
                                                                                      1,000
160,000
                                                                                        500
155,000                                                                                   0

150,000                                                                                -500
                                                                                      -1,000
145,000
                                                                                      -1,500
140,000                                                                               -2,000

135,000                                                                               -2,500
           2003      2004     2005      2006      2007      2008 2009          2010              2005          2006         2007         2008          2009         2010

   Data are 3-month moving averages and are not seasonally adjusted. Source: STB           Data are 3-month moving averages and are not seasonally adjusted. Source: STB




  Where to go for more information:
  •            The STB web site for railroad employment data is here.


  CONSUMER CONFIDENCE
  Who releases it and when?
  •            The Conference Board on the last Tuesday of the month.

  What is it and why is it important?
  •            The index is based on a monthly survey of 5,000 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 (“Present Situation Index”) and their expectations for the next
               six months (“Expectations Index”).
  •            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.

  What are the latest numbers?
  •            The consumer confidence index fell sharply to 52.9 in June 2010 from 62.7 in May 2010 (see
               chart on the top of the next page), the first decline after three straight monthly gains.
  •            Respondents who believe current conditions are "good" fell to 8.0% in June from 9.7% in May;
               those claiming current conditions are "bad" rose to 42.4% in June from 39.5% in May.
  •            What the Conference Board said regarding the June index: "Increasing uncertainty and
               apprehension about the future state of the economy and labor market, no doubt a result of the
               recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence.
               Until the pace of job growth picks up, consumer confidence is not likely to pick up."
  •            Readers of Rail Time Indicators know that what the Conference Board statement above implies is
               true: there is a strong statistical correlation between consumer confidence and the employment
               situation. A chart in the March 2010 Rail Time Indicators showed the correlation between
               consumer confidence and the overall unemployment rate. The chart on the top right of the next
               page is similar, except that it uses the unemployment rate for men only. The correlation between
               consumer confidence and unemployment is slightly stronger when the men’s unemployment rate
               is used rather than the overall unemployment rate.




  Rail Time Indicators – July 13, 2010                                                                                                              Page 25 of 31
                                                       Association of American Railroads



                    Index of Consumer Confidence:                         Consumer Confidence vs. Men's Unemployment Rate
                       January 2005 - June 2010                                      January 2005 - June 2010
                                (Index 1985 = 100)                                                      (Index 1985 = 100)
120                                                                      140

100                                                                      120                                             Inverse of Men's
                                                                                                                        Unemployment Rate
                                                                         100
 80
                                                                          80
 60
                                                                          60
                                                                                         Consumer Confidence
 40
                                                                          40
 20                                                                       20
                                                                                    correlation = 87%
  0                                                                        0
            2005         2006        2007    2008    2009    2010                2005         2006         2007      2008      2009         2010
          Source: Conference Board                                             Source: Conference Board, BLS, AAR




      •             Unfortunately, it would shock just about everyone if the unemployment rate fell sharply any time
                    soon. In its June 2010 survey, The Wall Street Journal panel of economists predicted the
                    unemployment rate would still be 9.4% in December 2010 and 8.6% in December 2011.

      Where to go for more information:
      •             The Conference Board’s press release on the consumer confidence index in June is here. July’s
                    consumer confidence index will be released on July 27.


      RETAIL SALES
      Who releases it and when?
      •             The U.S. Census Bureau, around the ninth business day of each month.

      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. (The “personal consumption expenditures” component of GDP is
                    adjusted for inflation, but is much less timely than retail sales.) Revisions to prior months’ retail
                    sales data can be large.
      •             Personal consumption accounts for approximately 70% of U.S. GDP. Thus, the health of the
                    economy depends largely on how much “stuff” people buy.
      •             It often takes time for consumers to recover from and respond to economic events. Thus, an
                    increase in spending today may reflect the results of an economy that began to recover a few
                    months earlier. A decrease in spending today may confirm an ongoing or worsening recession.

      What are the latest numbers?
      •             Total retail sales fell 1.2% ($4.4 billion) in May 2010 from April 2010, the first monthly decline
                    since September 2009 (see chart below left).
      •             Declines in May retail sales were spread across various retail segments, including motor vehicles
                    and parts (down $1.1 billion, or 1.7%), building materials and supplies (down $2.4 billion, or
                    9.3%), gasoline stations (down $1.2 billion, or 3.3%) and general merchandise (down $579
                    million, or 1.1%).
      •             “Core” retail sales — retail sales excluding autos, gasoline, and building materials — rose 0.1% in
                    May 2010, following a 0.2% decline in April 2010.




      Rail Time Indicators – July 13, 2010                                                                                     Page 26 of 31
                                                                        Association of American Railroads



       •             Why the decline in retail sales?                                                       Retail Sales: January 2005 - May 2010
                     Probably because of a number of                                                                               ($ billions)
                     factors, including high unemployment;                                     $380
                     lack of confidence even among those                                       $360
                                                                                                                                                      Total retail sales
                     who are still employed; the                                               $340
                     undesirability among many to take on                                      $320
                     more debt; and the desirability among                                     $300
                     many to “save for a rainy day.”                                           $280            Total retail sales fell 1.2% ($4.4
                                                                                                               billion) in May 2010 from April
                                                                                               $260            2010, the first decline in 9 months.
       Where to go for more information:
                                                                                               $240
       •             The Census Bureau’s press release on                                      $220
                     May retail sales is here. May retail                                                                                "Core" retail sales
                                                                                               $200
                     sales will be released on July 14, 2010.                                  $180
                                                                                                           2005        2006          2007           2008           2009      2010
                                                                                                       Data are seasonally adjusted. Source: U.S. Census Bureau
       LIGHT VEHICLE SALES
       Who releases it and when?
       •             The U.S. Bureau of Economic Analysis.

       What is it and why is it important?
       •             Covers 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
                     2009, 6% of U.S. Class I railroad revenue came from hauling autos and auto parts.

       What are the latest numbers?
       •             U.S. light vehicle sales in June 2010 were a seasonally-adjusted annualized rate of 11.1 million.
                     That’s up 14.0% from June 2009, which sounds pretty good until you realize that June 2009 was
                     the second worst June for auto sales since 1976. (The worst was June 1982.) At 11.1 million,
                     June 2010 was the fourth-worst June for auto sales since 1976 and 5% lower than May 2010.


      U.S. Light Vehicle Sales vs. U.S. + Canadian Rail                                                           Consumer Confidence vs. Auto Sales
              Carloads of Autos and Auto Parts                                                                         January 2005 - June 2010
                                (Index Jan. 2005 = 100)                                                                            (Index 1985 = 100)
130                                                                                               140
120                                                                                                                 "Employee pricing" promotion"
                   "Employee pricing" promotion
110                                                                                               120
                                                                                                                                                      Auto sales
100                                                     "Cash For Clunkers"                       100                                                                       "Cash For
 90
                                                                                                                                                                            Clunkers"
 80                                                                                                   80
 70
 60                                                                                                   60
               Auto sales                                                                                              Consumer confidence
 50            RR carloads of autos and auto parts                                                    40
 40
 30         correlation = 93%                                                                         20
                                                                                                             correlation = 92%
 20
                                        2007                        2009          2010                0
           2005          2006                         2008                                                   2005         2006           2007          2008          2009        2010
*Passenger cars, SUVs, minivans, and pickups. Data are seasonally adjusted. Source: AAR, BEA               Source: Conference Board, Bureau of Economic Analysis




       •             As the chart above right shows, there is a very strong positive correlation between auto sales and
                     the Conference Board’s consumer confidence index (see page 25 ). Since consumer confidence
                     is closely linked to the employment situation (see page 22), it seems likely that auto sales will
                     remain stuck at low levels until the employment situation markedly improves. That may not
                     happen any time soon.



       Rail Time Indicators – July 13, 2010                                                                                                                          Page 27 of 31
                                                    Association of American Railroads



•        And that means that rail auto traffic will probably continue to suffer as well, since there is a very
         close positive correlation between auto sales and rail auto-related traffic (see chart on bottom left
         of the previous page).

Where to go for more information:

•        BEA data on auto sales are here.


HOUSING STARTS
Who releases it and when?
•        U.S. Census Bureau, around the middle of each month.

What is it and why is it important?
•        A housing start is beginning the foundation of a residential home. Housing directly accounts 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.
•        Housing starts are generally considered to be a “leading indicator” because construction growth
         usually picks up at the beginning of a business cycle. Various factors affecting today’s housing
         market, including a huge oversupply of existing houses, might mean that new construction is a
         lagging indicator this time around.

What are the latest numbers?
•        Housing starts went from bad to worse in May 2010, falling 10% from an annualized and
         seasonally-adjusted 659,000 in April 2010 to 593,000 in May 2010. That’s the lowest of any
         month so far in 2010. Housing starts for single family homes fell even more — 17% — in May
         2010, dropping to their lowest level
         since May 2009. (Since 2005, almost              U.S. Housing Starts vs. U.S. + Canadian Rail
         80% of housing starts have been for             Carloads of Lumber, Wood & Forest Products
         single-family homes.)                                        (Index Jan. 2005 = 100)
                                                                         120
•        The sharp decline in housing starts in
         May follows the expiration of tax credits                       100
                                                                                                                                 Housing starts
         worth up to $8,000 for home buyers. To                           80                                                     Rail carloads
         be eligible for the credit, contracts had
         to be signed by April 30.                                        60
                                                                                        Housing Starts
•        At least since January 2005, housing          40        Apr '10 to May '10: -10.0%
                                                                May '09 to May '10: +7.8%
         starts and U.S. and Canadian rail             20
         carloads of lumber, wood, and forest                     correlation = 99%
                                                        0
         products have moved in virtual lockstep.               2005            2006               2007           2008         2009          2010
         Past results are no guarantee of future
                                                     Data are seasonally adjusted. Canadian rail traffic is included because Canada is a major source of
         results, but since rail carloads of these   lumber used in the U.S. Rail traffic is originations. Source: AAR, Census Bureau.
         products fell 4.9% in June 2010, it
         seems highly unlikely that June’s housing starts (data for which will be released on July 20) will
         be much better than they were in May.
•        It’s unrealistic to think that housing starts will return any time soon to anything close to the 2.1 to
         2.2 million range where they were in 2005 and early 2006. That means it will probably be a long
         time before the housing sector again contributes in a significant way to economic growth — just
         another factor standing in the way of sustained economic recovery.




Rail Time Indicators – July 13, 2010                                                                                                   Page 28 of 31
                                                  Association of American Railroads



Where to go for more information:
•        The Census Bureau’s press release on housing starts in May is here. June’s housing starts will
         be released on July 20, 2010.


CONSUMER PRICE INDEX (CPI)
Who releases it and when?
•        U.S. Bureau of Labor Statistics (BLS), mid-month.

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.
•        It’s 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 don’t
         know if higher prices are simply part of an inflation-related adjustment or if they signal higher
         demand that warrants expanded production.
•        The CPI is the basis for cost-of-living adjustments for Social Security, federal retirement
         payments, many private pensions, and food stamps.

What are the latest numbers?
•        The consumer price index for all urban consumers (CPI-U) fell 0.2% on a seasonally adjusted
         basis in May 2010 from April 2010, the second straight monthly decline. As of May, it was up
         2.0% on a year-over-year basis before
         seasonal adjustment. The decline in            Consumer Price Index*: Jan. 2005 - May 2010
         the CPI in May was largely due to lower                     (Index Jan. 2005 = 100)
         energy prices. The price of gasoline fell  116
                                                                                            CPI all items
         5.2 percent in May, the largest monthly    114  2005: +3.3%
                                                                     Apr. 2010 to
                                                         2006: +2.5%
         decline since December 2008.               112  2007: +4.1%
                                                                      May 2010:
                                                                                                 -0.2%
                                                                              2008: -0.0%
•        “Core” inflation — CPI less food and                         110     2009: +2.8%

         energy — was up 0.1% in May 2010                             108
         over April 2010 and up 0.9% year-over-                       106
         year.                                                        104
                                                                                                                CPI less energy
                                                                                                                   and food

•        Why is inflation so low? With high             102

         unemployment and still weak consumer           100
         confidence, many consumers aren’t in a           98
                                                                  2005         2006           2007          2008         2009          2010
         free-spending mood (see retail sales,
         page 26) and have a “get more for less”         *Urban consumers, U.S. city avg. seasonally adjusted. Source: Bureau of Labor Statistics

         mindset that resists efforts to get them
         to pay more for things. Plus, there’s still a lot of slack capacity at factories (see capacity
         utilization, page 21) and in the workforce.
•        The fact that consumer inflation is so low supports the view that the recovery is, at best,
         moderate. There’s little risk that the economy will overheat in the near term, and therefore
         probably little reason to expect the Federal Reserve to raise interest rates from their current very
         low level to combat inflationary pressures.

Where to go for more information:
•        The BLS press release on the May 2010 CPI is here. June’s CPI will be released on July 16.




Rail Time Indicators – July 13, 2010                                                                                              Page 29 of 31
                                               Association of American Railroads



U.S. DOLLAR EXCHANGE RATE INDEX
Who releases it and when?
•         The Federal Reserve Board, daily.

What is it and why is it important?
•         An index comprised of a weighted average of the value of the U.S. dollar against the currencies
          of a group of major U.S. trading partners.
•         An exchange rate is the price of one currency against another. A weaker U.S. dollar
          (“depreciation”) means that U.S. imports become relatively more expensive and U.S. exports
          become relatively less expensive abroad. All else equal, that means fewer U.S. imports and
          more U.S. exports.1 Because the U.S. is such a huge market, prolonged weakness in the dollar’s
          value could harm the economies of export-driven countries around the world.
•         Conversely, a stronger dollar (“appreciation”) means U.S. imports become relatively cheaper and
          U.S. exports become more expensive
          abroad. All else equal, that means
          more U.S. imports and fewer U.S.               U.S. Dollar Exchange Rate*: Jan. 2005 - June 2010
          exports.                                                      (Index Jan. 2005 = 100)
                                                                 106
                                                                 104                           May '10 to June '10: +0.6%
What are the latest numbers?                                     102                           June '09 to June '10: +0.1%
                                                                 100
•         The U.S. dollar rose 0.6% in June                       98
          2010 to its highest level since May                     96
          2009. A persistent higher-valued dollar                 94
                                                                  92
          could complicate the administration’s
                                                                  90
          efforts to double U.S. exports over the                 88
          next few years.                                         86           ↑ = dollar is getting stronger
                                                                  84           ↓ = dollar is getting weaker

Where to go for more information:                                 82
                                                                  80
•         Exchange rate data from the Federal                              2005            2006           2007            2008           2009           2010
                                                                 *Weighted average of the foreign exchange value of the U.S. dollar against the currencies of a
          Reserve is here.                                       broad group of major U.S. trading partners. Source: Federal Reserve Board




RAIL FREIGHT CARS IN STORAGE
Who releases it and when?
•         The Association of American Railroads, each month in Rail Time Indicators.

What is it and why is it important?
•         A freight car is deemed to be “in storage” if it has not had a loaded revenue move in more than 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.
          Data prior to March 2009 are not available.
•         Our best estimate is that, when the economy and the rail industry are at their healthiest, around
          2% or 3% of freight cars are in storage.



1
 For example, suppose a U.S. milling company wants to export to Germany a quantity of soybean meal that costs $300 in the
United States. At $1.50 per euro, the soybean meal costs 150 euros ($300 /1.5 euros per $) in Germany. If the dollar gets stronger
so that one euro falls to, say, $1.20, the cost of the soybean meal to a German customer rises to 250 euros ($300/1.2). If the dollar
gets weaker so that one euro is, say, $1.80, the cost of the soybean meal in Germany falls to 167 euros ($300/1.8).




Rail Time Indicators – July 13, 2010                                                                                                         Page 30 of 31
                                                                            Association of American Railroads



     What are the latest numbers?
     •              As of July 1, 2010, 365,279 freight cars — 23.7% of the fleet — were in storage. That’s down
                    3,064 cars from June 1, 2010. Cars in storage have declined for 12 straight months, totaling
                    more than 137,000 cars out since that time.


    Freight Cars in Storage on North American RRs                                               Freight Cars Coming Out of Storage During Month
525,000                                                                                       15,000
                               31.9% of the fleet
500,000                                                                                       10,000
475,000                                                                                        5,000
                                                                                                   0
450,000
                                                                                               -5,000
425,000
                                                                                              -10,000
400,000
                                                                        23.7% of the fleet    -15,000
375,000                                                                                       -20,000
350,000                                                                                       -25,000
325,000                                                                                       -30,000
                                                                                              -35,000
300,000
                                                                                              -40,000
275,000
                                                                                                        May Jun July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
250,000                                                                                                 09 09 09 09 09 09 09 09 10 10 10 10 10 10
                March-December 2009                                     2010
                                                                                                 Figure for May 2009 = difference in cars in storage on June 1, 2009 compared to cars in
 Data are as of the first of the month; % are cars stored as % of total fleet. Source: AAR       storage on May 1, 2009. Other months calculated similarly. Source: AAR




     Where to go for more information:
     •              Contact Frank Hardesty of the AAR’s Policy and Economics Department at 202-639-2321 or
                    fhardesty@aar.org.




                             ***********************************************************


                                            For more information on anything in Rail Time Indicators
                                      or if you have suggestions on ways to improve it, please contact:

                                                        Dan Keen (dkeen@aar.org, 202-639-2326)
                                                                           or
                                                      Shannon Stare (sstare@aar.org, 202-639-2322).


     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.




     Rail Time Indicators – July 13, 2010                                                                                                                          Page 31 of 31

				
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