This Fast Moving Data Point May Show Things Returning to Normal

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Just how quickly is the economy recovering from coronavirus? Rail traffic gave a potentially hopeful sign yesterday.

U.S. trains moved 497,397 carloads last week, according to the Association of American Railroads. It was the highest number since the last week of January. Traffic also rose 1.9 percent from the previous week, which is noteworthy because activity historically declines at this point of the summer.

Inflation is another set of data pointing toward a recovery. The Bureau of Labor Statistics reported that producer and consumer prices for July rose 0.6 percent — double the estimate. Core inflation (excluding food and energy) surprised to the upside as well. It suggests the economic shock of lockdowns are passing, and marks a return to normal from the sharp drops in March and April.

Energy could be the third item to watch. Crude oil prices (@CL) closed at $42.67 yesterday. It was their highest price since March 6, according to TradeStation data.

U.S. weekly rail traffic for 2018, 2019 and 2020. Notice red line rising despite declines in previous years (green and blue).
U.S. weekly rail traffic for 2018, 2019 and 2020. Notice red line rising despite declines in previous years (green and blue).

Oil could be important in coming weeks because travel is returning. Aside from trains, the Transportation Security Agency (TSA) reported air travel last weekend was back to its highest level since March. Meanwhile the glut of unused crude oil (see Energy Department) and domestic production (see Baker Hughes rig count) are both falling. That could mean more demand at the same time supply is tightening.

In conclusion, the country still has a long way to go to normal. But several items this week showed ongoing improvement. The next things to watch are:

  • Initial jobless claims today. Last week’s was the best since mid-March.
  • Retail sales and consumer sentiment on Friday. (Last month retail sales crushed estimates, while sentiment disappointed.)
Crude oil futures (@CL) daily chart.
Crude oil futures (@CL) daily chart.
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