Recession worries? Don’t look to railroads, one of the economy’s most reliable bellwethers.
CSX Corp. CEO Jim Foote sees no signs of a U.S. slowdown as shipments of steel, lumber, plastics, construction materials, cardboard and other goods are still climbing.
“Across the board there, people are still pretty optimistic about the future,” Foote said in an interview after the company released fourth-quarter earnings results on Jan. 16. “When you get a real recession, the volumes drop off really fast. That’s not happening.”
U.S. rail demand has remained robust this year in the face of a federal government shutdown, trade wars, a year-end drop in stocks, and concern over slowing economies in Europe and China, Foote said. In the first half of January, U.S. rail carloads rose 6.6% from a year earlier, according to data from the Association of American Railroads.
Railroads are often seen as a barometer of the U.S. economy’s health because they haul goods from a wide variety of industries. CSX’s revenue jumped 9.8% in the fourth quarter and carloads rose almost 3% even as the railroad cut back routes for containerized cargo in October as it sought to make that business more profitable.
Investors aren’t totally sold. The shares fell as much as 3.4% to $63.14 for the biggest intraday decline in a month. CSX advanced 13 % in 2018, the most on a Standard & Poor’s index of major U.S. railroads.
From what Foote is seeing, demand remains robust.
“There are all these noisy things out there that people are focusing on that say this must be the beginning of a bear market,” he said. “Certainly, we’re aware of that and are taking the necessary steps to monitor the situation and have plans in place.”
“In the meantime, my customers are saying, ‘I want to ship a lot of products,’ so I’m going to ship a lot of products.”
By Thomas Black