Union Pacific railroad trims volume outlook for rest of 2019
OMAHA, Neb.—Union Pacific expects to haul less freight in the second half of the year than it previously predicted, which isn’t a good sign for the economy.
The Omaha, Nebraska-based railroad said Wednesday that the volume of cars, construction materials, grain and imported goods it will haul in the second half of the year will likely be down by about 5 per cent.
Union Pacific said in July it expected to haul about 2 per cent less freight during the second half of the year.
The volume of freight Union Pacific and other railroads haul hints at the health of the overall economy.
“We have seen some general slowing in the economy, and we’re seeing some volume declines here,” Edward Jones analyst Jeff Windau said.
Earlier this week, a survey of manufacturing leaders slipped into negative territory, offering another indication that slower global growth and the U.S.-China trade dispute are weighing on the overall economy. The survey by the Institute of Supply Management showed that factory production fell last month.
Union Pacific’s figures showing declines in all but one of its major shipping categories in the third quarter only add to the concern about the economy.
“It’s consistent with the global economic slowdown and the tariffs, which are really putting a pinch on imports and exports,” Creighton University economist Ernie Goss said.
Windau said the trade dispute is hurting railroad shipments because imports and exports are down. Railroads haul many of those goods to and from ports in intermodal shipping containers.
Union Pacific said its intermodal shipments are down 10 per cent so far in the third quarter, and total volume in the quarter is down 7 per cent to date.
The analysts surveyed by FactSet predicted Union Pacific’s volume will fall 3.8 per cent in the third quarter.
Union Pacific has been working to streamline operations and reduce costs, so it should be able to at least partly offset the decline.
The railroad has been cutting costs by running trains on a tighter schedule so it can use fewer locomotives, cars and employees to move the same freight. The company operates 32,000 miles of track in 23 Western states.