AAR: Holiday cheer fuels rail momentum, but challenges persist

Although the U.S. economy chugs along as the year comes to a close, persistent weakness in manufacturing and declining coal demand continue to weigh on overall rail carload performance, according to the Association of American Railroads' latest Freight Rail Index (FRI) and economic report.

The AAR’s FRI is defined as intermodal plus carloads excluding coal and grain. AAR excludes coal and grain because their carloads tend to rise or fall for reasons that have little to do with what’s going on in the broader economy.

In November, the FRI was the highest it’s been since May 2021 and up 2.8% over October 2024. This suggests that, while the economy has its challenges, it remains generally on solid ground, according to AAR's Dec. 9 "Policy and Economics Rail Industry Overview."

Key takeaways in the report include:
• Intermodal demand surges. Consumer-driven demand and strong port activity pushed November to record-breaking rail container volumes, with three of the top five weeks in U.S. history;
• The job market remains robust. Strong November job gains boosted consumer confidence, supporting continued spending growth;
• Factory activity remains weak, impinging on rail carload volume. Flat rail carloads of industrial products in November reflect weak factory activity, with volumes down 1.0% year-to-date; and
• The carload big three — coal, grain and chemicals — are on different trajectories. Coal carloads are down sharply this year, continuing a multi-year slide; chemical carloads are at record highs and grain has recovered from a dismal 2023. Together, these categories account for half of total U.S. rail carloads.

 To download the full report, click here.