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For the first time since the economy began slowing three years ago, many of the country's largest transportation companies are seeing signs of a broad-based recovery that appears to have staying power.
The turnaround is coming in sectors that handle the vast bulk of goods transported domestically: railroads, trucking and package delivery. Their performance is considered a leading indicator of future economic growth, because many of the items they carry are used as raw materials in industrial production and for replenishing inventories. The companies, which closely monitor their biggest customers' own future expectations, say they are seeing increased demand across a broad swath of industries, from manufacturing and chemicals to retailing and lumber.
United Parcel Service Inc., which carries roughly 5 percent of U.S. economic output at any given time, Tuesday said it expects domestic shipment volume to accelerate during the next few months, including the company's strongest growth in the important Christmas season since 1999. Burlington Northern Santa Fe Corp., the second-biggest railroad in North America, posted its third quarterly revenue increase in a row and projected an even-larger percentage gain in the fourth quarter compared with a year earlier. The company is adding locomotives to handle increased volumes.
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Burlington Northern said delivery volume also is growing for industrial and consumer products, while agricultural shipments are strong for the first time in years, reflecting demand for wheat, corn and ethanol, which is used as a gasoline additive. The railroad also is seeing strong increases in lumber shipments, a bullish sign for future house construction.
UPS had been reluctant to suggest the economy was improving ever since the company goofed by predicting in early 2001 that the downturn would be just an "economic speed bump." In the third quarter, its overall delivery volume rose 3.3 percent from a year earlier to 13.3 million packages a day. That includes a 3.2 percent increase in the U.S. to 12 million a day, exceeding UPS's own forecast made in late July of 2 percent to 3 percent growth. In the current quarter, UPS predicts its domestic shipments will climb another 3 percent to 4 percent.
As freight volumes rise, many carriers are expanding capacity. Burlington Northern, which operates a rail network located mostly in the two-thirds of the U.S. west of the Mississippi River, plans to accelerate delivery of 65 new locomotives into the current quarter from early next year, largely to meet increased freight demand. The Fort Worth, Texas, company will acquire 350 more locomotives next year, an unusually large number, in response to higher volumes, to take advantage of federal investment incentives that remain in effect through 2004 and to get ahead of more-stringent pollution-emission standards in 2005.
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