Traffic skyrockets

Strong economy, global trade contribute to record-setting growth. Intermodal traffic is surging ahead at yet another record-setting pace this year. During the first quarter, U.S. and Canadian rail intermodal traffic rose 5.7%. Intermodal traffic has registered progressively higher increases during each of the first four months of the year when compared with 1996 data: 3.9% in January, 5.5% in February,

Strong economy, global trade contribute to record-setting growth. Intermodal traffic is surging ahead at yet another record-setting pace this year. During the first quarter, U.S. and Canadian rail intermodal traffic rose 5.7%. Intermodal traffic has registered progressively higher increases during each of the first four months of the year when compared with 1996 data: 3.9% in January, 5.5% in February, 7.1% in March, and 8.3% in April.

The increase in traffic levels was led by a surge in container loadings: Container traffic rose 7.1% during the first quarter, while trailer traffic rose 2% .

A major factor behind the robust growth in intermodal, the U. S. economy posted 5.6% growth during the first quarter of '97, compared with a 3.8% annual rate in the fourth quarter of '96. The preliminary report for first-quarter gross domestic product indicates that this growth was largely the result of robust consumer spending, strong business investment, and a large inventory buildup. Intermodal traffic was the beneficiary of this increase in retail stockpiles.

Consumer spending surged 6.4% during the quarter -- nearly double the 3.4% increase recorded in the fourth quarter of '96, and the largest gain in nine years. Investment spending rose 11.9%, as businesses planned for future expansion. Inventories jumped at a rate of $46.1 billion during the first quarter, nearly three times faster than the $17.1-billion rate in the fourth quarter. Despite the large increase in inventories, strong consumer demand has kept stockpiles low.

Strong growth in global trade during the first quarter of the year also had a positive impact on intermodal traffic. Imports posted their largest gain in 13 years during the quarter -- 21.9% -- due to the strong value of the dollar. Exports posted an 8.1% gain.

All modes of freight transportation benefited from the first quarter's strong economic growth and robust global trade. Increased demand helped reduce some of the excess capacity in the motor carrier industry, and thus raised intermodal trailer loadings.

According to IANA's Intermodal Market Company (IMC) Market Activity Report, freight levels for intermodal transportation providers were given a boost as shippers turned over more of their logistics management responsibilities to outside parties. After posting explosive growth in the fourth quarter of '96, IMCs continued to enjoy solid growth during the first quarter of '97, when total loads jumped 25.5% over '96 levels. Both intermodal and highway truck sectors experienced sizable gains in traffic levels.

Highway truck brokerage accounted for a substantial portion of the total growth in loadings. Highway truck loads soared 43.5%, while rail intermodal traffic levels climbed 12.6% during the first quarter.

Rail intermodal loads accounted for 52.2% of the total intermodal loads in the first quarter, as IMCs continued to evolve into full logistics providers to meet the outsourcing needs of shippers. This figure has declined steadily each quarter from a high of 66.5% in the first quarter of 1994. The explosive growth of IMC highway truck business is evidence of the dynamic changes occurring throughout the freight transportation industry.

Due to the fact that IMC intermodal traffic growth is outpacing the growth in rail intermodal loadings, it does not appear that IMCs are diverting traffic to the highway. IMCs are simply diversifying to meet the demands of the marketplace.

After experiencing rapid growth in the first quarter, the economy is expected to slow to a more sustainable pace in the second quarter. Recent economic indicators confirm this. In addition, reports on inflation suggest that price pressures remain largely in check.

However, despite early evidence that the economy is slowing in the second quarter, freight transportation demand should remain strong through the first half of '97. Since the Federal Reserve Board did not raise interest rates at its May meeting, interest rate-sensitive sectors of the economy should continue to grow at a moderate pace for the balance of 1997.

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