Sunday, April 17, 2005

Predicting the Economy with Railroad Material

Recent word from the expert economists contains some fear that the U. S. Economy might be starting a no-growth period. Several people I speak with in the Railroad Supply business beg to differ. Why?

For years, certain observers with those businesses who supply material to Railroads have maintained that Order Backlogs have been an early predictor of the U. S. Economy. If orders for rail, ties, freight cars, and locomotives are down, it will not be long before the economy begins to slide as well. This happened most recently about 1999. Everyone was confident that the economy was robust. But Railroad Suppliers noticed that their orders were down. It didn't add up.

Sure enough, the economy went into a recession about eighteen months later.

But now? Orders are high. All suppliers seem to say the same thing, that they are so busy that production has to be carefully scheduled now to accomodate customers. The last time this happened? Most recently it was for 2002 orders. That upsurge in ordering then foreshadowed a turnaround in the economy.

I am thinking that the bearish observers of the economy will be proven wrong over the next twelve months. We shall see!


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