Canada - Canada's two railroads expect to ship less freight than previously forecast this year, signalling a larger economic slowdown given the transportation industry's status as an economic bellwether.
 
Canadian National Railway (CN) and Canadian Pacific Railway (CP) both revised their annual volume predictions this week, with CN now expecting slightly negative volume growth down from mid-single digit growth and CP forecasting low-single digit volume growth down from mid-single digit growth.
 
CN blamed declining volumes on "deterioration in North American rail demand, as the economy continues to weaken." CP stated it expects to "navigate softer volumes, macro-economic challenges, and geopolitical tensions in the fourth quarter."
 
The lower forecasts come amid mounting fears of a recession and global trade tensions, particularly between the U.S. and China.
 
Despite the tougher outlook on volume, both companies reported increased revenue (CP had a record quarter), higher adjusted profit, and lower spending as a proportion of revenue in the third quarter.
 
CP jumped 3.25 percent to $296.45, while CN fell under one percent to $115.96 on the Toronto Stock Exchange.
 
Still, both railways already saw quarterly drops in shipments of metals and minerals, grain and potash, with CN also reporting a decline in forestry products.
 
Specific culprits over the last three months include a late grain harvest and hiccups in Alberta's contracts for crude oil by rail, according to analysts.
 
For CP, potash was "exceptionally weak" due to delays in contract signings between producers and buyers in China and India, National Bank analyst Cameron Doerksen noted to clients.
 
Doerksen noted he wasn't surprised by the lower volume guidance from either company, but remained optimistic about the longer-term potential for shipments.
 
The amount of crude by rail shipments are expected to increase when the Alberta government sorts out its contract situation, he noted, adding the government is trying to transfer its contracts to private industry.
 
Along with crude, Citi analyst Christian Wetherbee also noted a positive outlook for intermodal shipments.
 
Top tier railroads generally posted strong performance when it comes to controlling costs this quarter, Wetherbee noted, which "supports the belief that stocks can outperform in choppy markets."
 
"That said, a better volume outlook is key to incremental upside," he wrote.
 
BMO analyst Fadi Chamoun echoed that sentiment, noting to clients that CP exceeded expectations despite volume head winds and a soft freight market.
 
Railways may have muted their expectations for volumes around the bend, but the Bank of Canada took a more optimistic tone for the economy's direction this week.
 
Aside from the Prairies where conditions remain tough, business sentiment slightly improved this fall, according to the bank's seasonal economic outlook survey.
 
Emily Jackson.