Friday, April 20, 2012

Point Of View

I read a piece by AP yesterday which painted a glowing picture of a growing economy based on the increasing profits of railroads; to be specific two railroads, Union Pacific and CSX. It did not mention profitability of any other railroads and my eye caught the phrase that, “both [railroads] were able to increase rates enough to offset a decline in coal shipments,” which reminded me that profits don’t necessarily mean growth.

So I went looking for tonnage shipped on railroads, which would be a far better measure of growth, since it would not be affected by inflation or pricing consideration. If you are shipping a higher tonnage then more goods are being sold.

Sure enough, from the Global Economic Intersection I found that, “Week 11 of 2012 ending 17 March 2012 shows rail traffic continued to contract over 2011 levels according to data released by the American Association of Railroads.” That’s based on tonnage.

Part of that was coal, which has to do with a mild winter, but there is still “concern,” and the picture painted by the ton-miles of freight hauled is certainly not as rosy as AP painted in their article based on profits. There might be a lesson there, but I doubt that anyone will learn it.

Update, Saturday morning: That "reduction is about coal, which has to do with a mild winter" has been bugging me. That assumption seems a little glib to me. How much coal is used for heating today? I would guess pretty much none. Coal is used for generating electricity. How much electricity is used for heating? I would guess, not a whole hell of a lot. I'm not sure how valid that "mild winter" theory is.

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