Record Rail Intermodal and Consumer Spending Signal a Positive Economic Outlook for 2025

Resilient Consumer Spending Drives Rail Growth

November rail traffic data from the Association of American Railroads (AAR) signals a promising economic outlook heading into 2025. Intermodal traffic, buoyed by resilient consumer spending, has led all categories in November and throughout the year. The AAR’s Freight Rail Index (FRI) reflects this trend, highlighting a 2.8% increase over October, marking its highest point since May 2021.

Robust consumer demand and increased port activity fueled record intermodal performance, with three of the top five weeks since data collection began in 1988 occurring in November. The AAR credits the strong job market for driving consumer activity, a key component in sustaining economic growth.

Intermodal Traffic Reaches Historic Highs

In November 2024, U.S. railroads originated an average of 282,000 intermodal containers and trailers per week, a 10.7% increase over November 2023 and the highest weekly average for any November since 1989. Year-to-date intermodal volume reached 12.75 million units, up 9.1% from 2023, making 2024 the third most successful year in recorded history, trailing only 2018 and 2021.

Container originations averaged 272,243 per week in November, the third-highest weekly average on record. The all-time top nine weeks for container volumes occurred since late August 2024, underscoring a remarkable surge in activity. Enhanced port performance contributed significantly, with year-to-date aggregate volume at 10 major U.S. ports up 13% through September. West Coast ports saw an 18% increase, while East Coast ports grew by 9%, partly driven by shipment diversions ahead of potential strikes and tariff changes.

Consumer Confidence Boosts Economic Momentum

Consumer spending, which accounts for 70% of GDP, has been a driving force behind the positive outlook. Inflation-adjusted consumer spending on goods rose 3.1% year-over-year in October, supporting year-long intermodal growth. The labor market’s resilience further bolstered consumer confidence, which reached a 16-month high in November.

Key labor market indicators include:

• More job openings in October compared to September.

• The fewest unemployment claims since April.

• A five-month high quit rate in October, signaling worker confidence in finding better opportunities.

Challenges in the Manufacturing Sector

While intermodal results shine, the manufacturing sector continues to face challenges. Carloads closely tied to manufacturing output, including chemicals, paper, steel, and motor vehicles, were down 1% in the first 11 months of 2024 compared to the previous year. Total carloads in November fell 3.8% year-over-year, reflecting ongoing weakness.

Coal shipments, a significant portion of carload activity, continued their decline, down 15.2% in November and 14% year-to-date, reaching their lowest levels on record. Conversely, chemical carloads set records, averaging 32,288 weekly in November, up 3.9% year-over-year, driven by low natural gas prices.

A Cautiously Optimistic Outlook for 2025

Despite challenges, the combination of strong intermodal growth and resilient consumer spending provides reasons for optimism. According to the AAR, economic resilience will depend on the labor market’s strength, consumer spending trends, and the trajectory of inflation and interest rates. With the right policies and strategic navigation of potential disruptions, the rail industry and broader economy are positioned for continued growth in 2025.