According to the Washington-based Association of American Railroads, cumulative freight volume for the first 52 weeks of '08 totaled 16.57 million carloads, down 2.2% from the previous year's total. More alarmingly, volume for the first four weeks of December was off about 20%. The steep December drop indicates not only that the situation is worsening but that the holiday shopping season failed to provide any pick-me-up at for the beleaguered industry. What's more, precipitous drops from 33% to 53% for commodity categories related to the construction industry suggest particularly hard times for owners of properties leased to building firms and their suppliers.
Railroads serving Canada and Mexico appear to be faring slightly better, partly as a result of a larger percentage of goods arriving at Canadian and Mexican ports for transport to US markets. Results for the two countries, however, are mixed rather than positive. For example, AAR statistics show cumulative trailer and container volume for Canadian railroads was up 1.4% from '07. At the same time, cumulative originations were down 6.3%. In addition, carload and intermodal traffic fell 25.7% and 35.5%, respectively, in the final week of the year, an even greater fall than the US experienced.
As for Mexico, AAR figures show carload freight on Kansas City Southern de Mexico, the Mexican offshoot of the US-based Kansas City Southern Railway Co., with cumulative volume down 7.9% from '07. But as with Canada, trailers and container volume was up 6.6%. Also, 52-week volume on the Mexican railroad Ferrocarril Mexicano was up 3.1% from last year, most likely reflecting greater internal consumption of goods due to a growing middle class since the company does not provide rail service into the US.
On the trucking front, truck tonnage fell 1.8% in November, the most recent period for which statistics are available, compared to the same month a year earlier, according to American Trucking Associations of Arlington, VA. The decline duplicated October's year-over-year downturn. "The freight outlook remains bleak," says ATA chief economist Bob Costello, adding that he expects the situation to weaken further as the economy contracts through the first half of 2009. The decline in the group's for-hire seasonally adjusted truck tonnage index marked the second straight year-over-year decline, following 11 straight increases. On the other hand, November's tonnage index gained 1.7% over October's, marking the first month-to-month increase since June.
The November decline followed a 0.6% October drop in the US Department of Transportation's freight transportation services index compared to the preceding year. The reading of 109.1 represented the lowest level for the month of October in five years. Wholesale inventories also fell 1.1% in October, the largest drop in seven years, according to the US Commerce Department. The 4.1% decrease was the largest since the department began keeping records in 1992.
The slump in truck freight, not surprisingly, has also led to a slump in truck sales and production, according to ACT Research of Columbus, IN. The slump could prove a double whammy for industrial property owners: while decline in freight volumes reduces demand for warehouse and distribution space, cutbacks in the automotive industry reduce demand for supplier space. On a more positive note, the research firm predicts falling energy prices and promised government stimulus packages should begin to drive recovery by the second half of the year.
Air freight is also suffering, according to the International Air Traffic Association. The Geneva, Switzerland-based organization reports global air cargo traffic plummeted 13.5% in November. The figures marked the sharpest declines since the months after 9-11.
"The 13.5% drop in international cargo is shocking," says IATA director general Giovanni Bisignani. "As air cargo handles 35% of the value of goods traded internationally, it clearly shows the rapid fall in global trade and the broadening impact of the economic slowdown. The industry is now shrinking by all measures."
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