The Railroad to Recovery

The jury is still out on whether the economic recovery is underway and what shape it will take. Some analysts say it’s already here and it will eventually look like a V, with a sharp rebound in GDP, while pessimists argue for a W, a double dip, with another economic downturn in the cards. Other economists, however, are finding hopeful signs in economic trends that don’t often make the financial headlines.

Railroads are a good example. A boost in rail traffic is frequently a sign that the economy is growing, since the major rail shippers are among the nation’s economic kingpins - manufacturers, construction firms, and auto dealerships. In December, railroad shipping traffic was up 4.6%, the first year-over-year increase in more than a year. On the other hand, although the number of carloads shipped was also up, the total was still about 14% less than the same period in 2007.

Analysts are also looking at prices of secondary metals like rhodium, which is used by car makers in catalytic converters. Prices of these metals can be a more accurate sign of demand, since they aren’t traded on commodities exchanges and can’t be easily used by speculators as an investment tool. The price of rhodium has mushroomed by 60% over the past couple of months, which is seen as a positive omen for the nation’s car makers and related industries. A return to good health in the auto industry would do a lot shore up the nation’s economy, since it accounts for 4% of the country’s GDP and employs about one out every 10 workers.