Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 31, 1995                   TAG: 9503310062
SECTION: BUSINESS                    PAGE: A-7   EDITION: METRO 
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE:                                 LENGTH: Medium

DROP IN RAIL FREIGHT POINTS TO SLOWER ECONOMIC PACE

Railroad freight traffic, traditionally a barometer of the U.S. economy, in recent weeks has suggested a slower growth rate, according to an economist for the Association of American Railroads.

Freight loadings on U.S. railroads, including those on Norfolk Southern Corp. trains, have dropped, providing another indication that interest-rate increases by the Federal Reserve Board are having that agency's desired dampening effect on what the Fed considers an overheated economy.

For the week ending March 18, intermodal freight traffic - that which moves by a combination of rail, truck and ship - rose 3 percent from the comparable week in 1994, and other freight was up just 1 percent from the same week a year earlier, the railroad association reported. Car loadings were up 3.7 percent in the West but down 1.6 percent in the East, the association said.

``The economy is still growing, but the rate of growth appears to have slowed,'' said Harvey A. Levine, the railroad association's chief economist. He noted that loadings of new automobiles were off 1.1 percent for the week, and lumber and wood products were off 3.1 percent.

``New homes and new cars are exactly the sort of big-ticket purchases that are especially susceptible to interest rate rises,'' Levine said.

The lower freight loadings of recent weeks follow much stronger weekly gains earlier in the year.

Although Norfolk Southern's intermodal freight has continued a very strong rate of growth at around 20 percent because of a robust export and import market, the company has experienced drops in its other freight traffic in recent weeks, according to NS reports.

NS general merchandise traffic, which showed a weekly increase of 5.6 percent as recently as Feb. 25, had dropped to a 0.1 percent increase for the week ending March 25. NS coal traffic, moreover, has shown actual declines from 7.3 percent to 9 percent below last year's levels for the past three weeks.

NS freight traffic reflects a slowing of the economy, said Don Bourquard, NS director of market research and economics. However, the downward trends in merchandise and coal freight are exaggerated by weather-related differences between this year's and last year's short-term business cycles and by price-shopping by foreign buyers in the coal export market, he said.

The declines in freight shipments don't indicate a long-term downward trend, and not too much such be read into them, Bourquard said. NS freight business should pick up later this year aided by increases in auto and steel shipments, he said.

Bourquard thinks the Federal Reserve has been able to cool off the economy to a more moderate rate of growth. ``We're getting back into a sustainable growth rate without having to go through a recession,'' he said.

He said he doesn't expect any more interest-rate increases by the Fed, and some rate cuts might be in the offing.

Stock analysts on Wall Street, who are advising investors to buy NS and other rail stocks, agree that the economy has achieved the soft landing the Fed was searching for, according to recent Wall Street Journal coverage.