BNSF Railway foresees a slow economic recovery and doesn’t expect its freight volume to return to pre-recession peaks until about 2013, a top executive said.
“We’re planning for modest growth,” said John Lanigan, the railroad’s executive vice president and chief marketing officer. “We don’t think we will be back at 2006 volume levels next year. We think it’s probably going to be 2013.”
He said “skittish” large retailers, fearful of being stuck with unsold Christmas inventory, have told him they’re requiring suppliers to hold stockpiles at their own expense at forward supply points that retailers can tap to meet spikes in demand. “That’s kind of a departure from what retailers have done in the past,” Lanigan told Progressive Railroading’s RailTrends conference in New York.
“When you have retailers, which are really kind of the bellwethers of the economy, behaving that way heading into the Christmas season, it’s got to give all of us reason to pause and wonder exactly where we are (in) the recovery.”
Lanigan noted rail volume recovered strongly through the first quarter, then “moved sideways” until increasing about a month ago, when BNSF had its first 200,000-shipment week since the recession. He said BNSF’s weekly volume has slipped since then to the 195,000-200,000 shipment range, about 90 percent of levels at the 2006 peak.
BNSF is benefiting from strength in agricultural and energy-related shipments “but 70 percent of U.S. GDP is still consumer spending, so until the consumers start buying houses, cars, washers, dryers, furniture, etc., then we’re going to have this slow road back.”
If volume takes until 2013 to recover to 2006 levels, it will mean seven years have passed between cyclical peaks. “If you go back to the various recessions we’ve had in the last 30, 40, 50 years… no economic cycle has taken seven years to go from peak to peak,” Lanigan said.
“This has been a very difficult time and the key component to this economy getting back to where it could be is the consumer,” he said. “And until the consumers feel that they’ve got some certainty in their lives, that their job is going to be secute, that they can see their companies hiring people, that they can see some kind of progress, then we’re going to have this slow recovery.”