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Although their recent traffic performance has been “distorted” by Midwest flooding, U.S. railroads continue to build carloads at a steady, albeit slower pace, according to Robert W. Baird & Co. Inc.’s “Domestic Truck, Intermodal and Rail Trends” report for July.

Excluding coal, carloads have been trending up 5 percent year over year so far in July compared with plus-4 percent in June and plus-2 percent to plus-3 percent in the second quarter’s first six weeks, the report states.

“Looking ahead, secular intermodal growth and continued recovery in industrial end-markets should continue to drive growth in the back half of the year, with rail commentary suggesting expectations for a compressed peak season with a seasonal demand pickup beginning in mid-August,” Baird analysts said in the report.

Industrial volumes have continued to steadily improve since demand softened in April and early May. As of mid-July, volumes were up 8 percent vs. 1 percent to 2 percent in April/early May.

“Recent improvement has been largely attributable to improved metal-related volumes,” Baird analysts said. “Outlook commentary from rails suggests improved demand should continue in the second half, benefiting from ongoing industrial recovery and improved auto production.”

Intermodal volume growth continues, but at a slower rate, reflecting recent weaker import trends amid economic uncertainty, the report states.

“Commentary from rails suggests expectation for an August pickup in demand with a more compressed peak season,” Baird analysts said. “Secular growth opportunity remains, which should support improving growth in the second half.”

However, coal volumes still are a laggard, they said. Flooding impacts to the Powder River Basin continue, although rail networks are stabilizing. Looking ahead, Norfolk Southern Railway and Union Pacific Railroad are “more bullish” on the second-half coal outlook because export coal demand is solid and domestic utility demand is steadying as stockpiles normalize, the report states.