A new report says the uncertain economic climate continues to weigh on intermodal and carload traffic in different ways.
The latest analysis by the Association of American Railroads finds that the U.S. economy is caught between signs of strength and pervasive uncertainty, influenced by a range of variables including consumer spending patterns, global supply chain challenges, and fluctuating interest rates.
Intermodal traffic experienced a notable decline, with a 2.9% drop in originations in June 2025 compared to the same month in the previous year. This decrease is attributed to ongoing global supply chain disruptions and reduced international shipments, as worldwide trade tensions and logistic bottlenecks persisted. Despite this setback, the second quarter of 2025 showed a 2% increase in intermodal traffic year-over-year, indicating a potential resilience amidst prevailing challenges.
Conversely, carload traffic — excluding intermodal — saw a 2.1% increase in June 2025 on a year-over-year basis. This marked the fourth consecutive month of gains, underscoring a steady, albeit fluctuating, demand within the industrial economy. The second quarter of 2025 particularly stood out with a 4.8% rise in carloads compared to Q2 2024, representing the largest quarterly gain since the third quarter of 2021.
Coal staged a modest recovery, with a 2.4% increase in carloads in June 2025, marking four consecutive year-over-year gains. This uptick reflects improved performance compared to previous periods of decline, as the coal industry adjusts and rebounds from historical lows.
The chemicals sector, however, faced slight contraction, with a 0.6% decrease in carloads from June 2024 to June 2025. This decline is noteworthy as it breaks a streak of consistent growth over the past 22 months. Nonetheless, year-to-date figures reveal a 1.6% increase in chemical carloads, driven by sustained manufacturing activity despite higher natural gas prices that could potentially hinder production.
Grain carloads presented a more optimistic picture, increasing by 11.3% in June 2025 compared to the previous year. This growth is attributed to a rise in U.S. exports, bolstered by substantial gains in corn despite declines in soybeans and sorghum. Such export-driven demand has significantly contributed to the sector’s performance, maintaining upward momentum.
Industrial products, which encompasses a broad range of goods including chemicals, autos, and steel, a marginal 0.4% growth was noted in June 2025. However, year-to-date carloads for this category showed a slight decline of 0.3%, reflecting the sporadic nature of industrial output over the past 18 months. These fluctuations point to a broader sluggishness that typifies the U.S. industrial economy during this period.
Various economic indicators further illustrate the environment within which the rail industry operates. The labor market, for instance, has shown mixed signals. Preliminary data indicate net job gains of 147,000 in June, contributing to consumer spending momentum. Yet, the unemployment rate’s slight decline to 4.1% and the fluctuating job openings suggest potential vulnerabilities. The consistent job growth has sustained consumer-driven freight demand, crucial for the rail industry, but signs of a cooling labor market warrant cautious optimism.
Consumer spending, which accounts for approximately 70% of U.S. GDP, presents another critical factor. May 2025 saw a preliminary 2.2% increase in total inflation-adjusted consumer spending year-over-year, marking the smallest gain in over a year. On a monthly basis, spending actually fell in May, hinting at a slowdown that, if prolonged, could damp rail volumes, particularly intermodal traffic.
The manufacturing sector continues to contract, with the ISM Manufacturing PMI remaining below 50%, indicating a lack of expansion. This ongoing contraction poses challenges for the rail freight industry, especially given the significant share of rail carloads linked to manufacturing outputs. Meanwhile, the services sector, a dominant component of the U.S. economy, is teetering on the brink of contraction, with its PMI hovering just above the 50% threshold. A downturn in services could further impact job growth and consumer demand, cascading into reduced intermodal flows.
Inflation remains relatively stable, with the price index for personal consumption expenditures up 2.3% year-over-year in May 2025. This aligns closely with the Federal Reserve’s long-term inflation target, but continuous monitoring is essential as the Fed assesses future interest rate adjustments. Inflation trends, coupled with other economic data, will play a crucial role in shaping fiscal policies that impact the rail industry.
Looking ahead, AAR said the second half of 2025 appears unlikely to provide definitive clarity, as freight volumes are expected to continue responding to a complex blend of supportive and restraining forces.
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Find more articles by Stuart Chirls here.
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