AAR: Mixed economic signs could signal headwinds for rail

In February, intermodal volume rose 6.4% year over year, with originations averaging 276,654 units per week, the most ever for a February, the Association of American Railroads reported March 10 in its latest "Rail Industry Overview" report.

The strength in intermodal traffic reflects solid consumer spending and, in part, efforts by some importers to expedite shipments in anticipation of tariffs. Through the first two months of 2025, total intermodal volume rose 8.5% and container volume rose 9.5%. Year-to-date container volume was the highest ever for that two-month period.

Continued intermodal growth will depend on future consumer spending trends, which will hinge on a robust labor market and could be shaped by U.S. trade policy and the use of tariffs, the AAR report states.

Meanwhile, U.S. railroads originated 843,618 carloads in February, a 4.5% decrease from February 2024 levels. Carloads rose fractionally in January, their first increase in five months. However, last month severe flooding in the Northeast and frigid temperatures in the upper Midwest and much of the rest of the country constrained rail operations and the ability of rail customers to load and unload freight. Without those weather issues, rail volumes likely would have been higher, the AAR report states.

Other key takeaways from the AAR's latest report include:

• Manufacturing slump pressures rail volumes. Industrial carloads fell 3.6% in February as manufacturing struggles persisted, with weak demand, supply chain disruptions, and lower new orders weighing on both production and rail freight demand;

• Trade uncertainty and inflation loom over growth. Thirty-eight percent of rail carloads and intermodal units and 37% of rail revenue are directly tied to global trade. Changes in trade policy will clearly impact rail volumes; and

• Mixed economic signals continue. A steady labor market and services sector growth, but rising inflation, declining consumer spending, and falling consumer confidence could signal potential headwinds for rail demand.

"The medium- and long-term impacts of today’s evolving economic policies — encompassing tariffs, regulations, taxes, and more — remain uncertain. What is clear, however, is that the rail industry must be able to adapt as conditions change," the report states.