CSX CSX Corporation

By Colin Kellaher

North American rail traffic fell 3.3% last week, as weakness in the U.S. manufacturing sector continues to weigh on volumes, data from the Association of American Railroads showed.

Carload volume and intermodal traffic for the week ended Aug. 31 on 12 reporting U.S., Canadian and Mexican railroads each fell 3.3%, the trade group said Wednesday.

North American rail traffic was 4.8% lower in the week ended Aug. 24. For the first 35 weeks of the year, North American volume is down 2.5%.

The AAR said U.S. rail traffic fell 4.5% last week after sliding 5.9% a week earlier. U.S. carloads fell 4.2% amid declines in eight of the 10 commodity groups tracked, while the volume of U.S. intermodal containers and trailers fell 4.9% for the week.

For the month of August, U.S. rail traffic fell 5%, marking the seventh straight month of declines for both carloads and intermodal units. U.S. rail traffic is now down 3.6% for the year to date, the AAR said.

"While the strength of the overall economy remains unclear, in the last quarter it has become much more evident that the portion of the economy which generates freight--manufacturing and goods trading--has weakened significantly," John Gray, AAR senior vice president, said of the U.S. data.

"We had a similar pattern in 2016, when rail traffic was weak and the overall economy wobbled but didn't fall down," Mr. Gray added. "Railroads are hopeful that the uncertainty plaguing economies here and abroad will dissipate soon and solid economic and industrial growth will return."

Union Pacific Corp. (UNP) earlier Wednesday said it now expects its freight volumes in the second half of the year will fall in the mid-single digits, compared with a July forecast for a decline of about 2%.

Adding to the pain, Moody's Investors Service on Wednesday said it expects coal demand from utilities will drop by more than 50% by 2030, weighing on U.S. railroads. Coal is the largest freight commodity, excluding intermodal units.

"Our forecast of a more than 50% drop in coal demand from utilities by 2030 implies that coal demand would decline by about 7% per annum on average over the next 10 years, which would translate into roughly $5 billion in lost revenues for the railroads, or 5.5% of 2018 industry revenues," Moody's said.

Elsewhere in North America, the AAR said rail traffic edged up 0.3% in Canada last week, as a 2.2% rise in intermodal units more than offset a 1.3% drop in carloads.

Rail traffic slipped 0.4% in Mexico last week, the AAR said, with intermodal units and carloads both down 0.4%.

Write to Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

September 04, 2019 13:45 ET (17:45 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.