Reader Feedback: Freight Train Cars
Many economists have one or two anecdotal (real world) measures of economic activity.  Some count cars in the mall parking lot, some follow movie box office receipts, others watch shopping bags at the mall, or how long the wait is at their favorite restaurant.  One of ours is count the number of cars in freight trains.  We got the idea during the Senate Confirmation hearing for Treasury Secretary John Snow, who used to be the CEO of CSX – the railroad.  During that hearing in early 2003, in answer to a question about weakness in economy and the jobless recovery he said "a typical efficient-sized train is about 100 cars, or 110 cars.  So, our trains are going out with 60 or 70 cars on them rather than 100.  Now, if the demand picks up, we will be able to add those additional 20, 30, 40 cars on the trains without much additional cost."

To paraphrase, when trains have 100 or more cars, the economy is doing well, but during recessions, trains often have just 60-70 cars.  We have tested this anecdotal evidence over the years, and we've found it to be a fairly good gauge of economic activity.  It also gives us something to do when we are stopped by a train.  It's not perfect, and it's only anecdotal, but we love the information.  One thing to remember is that during recoveries not "all" trains have 100 or more cars on them.  However, during recessions, very few are 100 or more cars in length.

Because the First Trust offices are positioned right next to a Union Pacific train line in the suburbs of Chicago, we get lots of samples for this indicator.  Moreover, we have talked about this from time to time in speeches, so occasionally a friend will send in some data.  We want your feedback, too.  The next time you are stopped and waiting for a freight train, do some economic research and send us the number of cars you counted, the date, and the location!  You can email us at economics@ftadvisors.com.  From time to time, we'll post up the latest figures we gather.

So, what is the train length indicator saying today?  Below are a couple of recent data points.  As you can see, there is no evidence of an economy in trouble.  Not all trains are 100 cars or more, but there are some very long trains, that would probably not exist if the economy was actually in a double dip.

Below is a list of recent freight trains and the number of cars each had.

8-20-2010  Cary, NC - 100
8-24-2010  Wheaton, IL - 92
8-24-2010  Wheaton, IL - 117
8-25-2010  Wheaton, IL - 137
8-25-2010  Wheaton, IL - 73
8-26-2010  Wheaton, IL - 114
8-26-2010  Wheaton, IL - 79
8-27-2010  Wheaton, IL - 112
8-27-2010  Wheaton, IL - 135
8-30-2010  Wheaton, IL - 98
Posted on Tuesday, August 31, 2010 @ 9:12 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.