Union Pacific CEO says consumers 'just don't seem to be showing up'

Thu Jan 21, 2016 1:43pm EST
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By Nick Carey

CHICAGO (Reuters) - Facing a freight recession caused by slumping commodity prices and industrial output, No. 1 U.S. railroad Union Pacific Corp UNP.N said Thursday hopes of strong economic growth have so far been undermined by a key missing ingredient - the American consumer.

"What's causing us some concern is it’s hard to figure out where the consumer is at," Chief Executive Lance Fritz told Reuters by phone.

While Americans were buying automobiles and unemployment numbers looked good, he said labor participation "is lackluster and consumers just don’t seem to be showing up to purchase goods and services."

Ever since oil prices began to decline in 2014, economists and corporate America have hoped this would translate into higher consumption.

"There was a widespread belief that consumers would turn the savings from low fuel into spending and we haven’t seen that so much," Fritz said.

The chief executive spoke to Reuters after the Omaha, Nebraska-based railroad company reported a lower fourth-quarter profit amid declining freight volumes affecting coal, steel, industrial goods and agricultural products, that reflected a broad-based commodity slump. The one bright spot was automotive shipments, as consumer goods also took a dive.

Shares were down 3.5 percent at $71 in afternoon trading.

Just this week, Moody's Investors Service warned of "increasing risks of an industrial recession" for North American manufacturers.   Continued...

A set of Union Pacific freight locomotives roll past a holding lot with Toyota automobiles at the Port of Long Beach in California December 4, 2008.  REUTERS/Fred Prouser