The U.S. railroad industry faces a future filled with significant uncertainty as it navigates numerous economic and policy challenges, according to the latest annual Rail Industry Outlook by the Association of American Railroads (AAR). The comprehensive report, which can be accessed here, highlights the impact of potential shifts in fiscal policy, trade, immigration, taxation, and regulatory frameworks as we head into 2025.
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Despite the prevailing uncertainty, the rail industry ended 2024 on a strong note, with intermodal volumes reaching their third-highest annual figures. According to data from the IndexBox platform, consumer spending, bolstered by a robust labor market, played a pivotal role in this growth, even as coal shipments continued their decline. Excluding coal, carloads saw modest gains in December, marking a significant achievement since this growth trajectory has not occurred since 2018.
The AAR’s Freight Rail Index (FRI), which tracks seasonally adjusted intermodal volumes and carloads excluding coal and grain, reported a 2.2% increase in December from the previous month. This upward trend is a positive indicator that, despite manufacturing sector weaknesses and a complex policy landscape, the broader U.S. economy retains resilience as we transition into the new year.
Labor market insights from the AAR reveal that consumer spending continued to be robust in 2024, driven by an average of 186,000 new jobs per month, a figure comparable to pre-pandemic levels from 2010-2019. Inflation-adjusted average earnings saw consistent year-over-year growth across 20 months, supporting strong consumer activities and, by extension, rail intermodal growth.
Manufacturing, a crucial component of rail demand, struggles against the backdrop of economic uncertainties and past hindrances. Nevertheless, 12 out of 20 carload categories tracked experienced growth in 2024. Specifically, chemicals reached record carload numbers at 1.69 million, up 4.1% year-on-year, while grain exports saw an 8.5% increase, underlining a positive shift in some sectors despite overall challenges. While business confidence shows signs of improvement as we advance into 2025, spearheaded by recent surveys from the National Association of Manufacturers and the Business Roundtable, the way forward remains unpredictable.
According to Rand Ghayad, AAR’s chief economist, “The interplay between these policies will be critical in determining whether the labor market remains resilient enough to sustain consumer spending and support continued rail intermodal growth.” Railroad operators remain committed to adapting to these challenges by prioritizing customer service and economic growth throughout the coming year.
