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Rail-Freight Surge Before Holiday Shows U.S. Skirting Recession

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Rail-Freight Surge Before Holiday
A Burlington Northern Santa Fe (BNSF) train moves through Cajon Pass near San Bernardino, California. Photographer: Jonathan Alcorn/Bloomberg

Dec. 29 (Bloomberg) -- North American railroads’ freight volumes surged 17 percent last week, the most in a year, in an indication that the U.S. economy will avoid a second recession.

Rising shipments of retail goods helped drive the jump in carloads for the period ended Dec. 24, the Association of American Railroads said today. The trade group released the results after government data showed U.S. jobless claims fell to a three-year low in the past month.

The double-dip recession “that people feared only six, eight, 10 weeks ago never materialized,” said Tony Hatch, an independent railroad analyst in New York. “Things are going pretty well in a variety of the commodities that the railroads carry.”

Analysts focused on pre-Christmas rail traffic this year because record retail sales over the Thanksgiving weekend suggested that the seasonal peak in freight shipping might extend into December. Many retailers delayed building inventory amid concerns that the economy was weakening.

Commodity carloads such as chemicals posted the second-largest jump of 2011, up 12 percent. Intermodal carloads, which can move by rail, road and sea and often move retail goods, rose 23 percent, the most in a year.

The increase in freight traffic may also signal that shippers put more long-haul cargo on trains instead of trucks as railroads improve reliability for last-minute deliveries.

“The rails are getting stuff off the road,” said Lee Klaskow, a Skillman, New Jersey-based analyst with Bloomberg Industries.

Carriers such as Omaha, Nebraska-based Union Pacific Corp., the biggest U.S. railroad, and Warren Buffett’s Burlington Northern Santa Fe tend to be leading indicators of economic health, Klaskow said.

“Have we skirted a double-dip recession? According to the rail tea leaves, yes,” Klaskow said. In addition, “the economic data appears to be showing some sort of economic growth.”

To contact the reporter on this story: Natalie Doss in New York at ndoss@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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