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A sharper decline in U.S. railroad cargo this quarter points to weak spots in the U.S. economy as a strong dollar crimps exports, retailers whittle down excess inventory and energy investment stalls.

Union Pacific, Warren Buffett’s BNSF Railway Co. and other large U.S. railroads have posted a 5.1 percent drop in carloads since the beginning of October, topping decreases of 1.6 percent in the third quarter and 1.8 percent in the second. A decline in consumer-related cargo this quarter is adding to weakness in industrial and energy traffic.

While it’s too early to tell if something “drastic” is happening to the economy, “it does feel kind of like a soft, flat, sort of wait-and-see environment,” said Union Pacific Chief Financial Officer Rob Knight at a Credit Suisse Group AG conference last week. The rail industry provides detailed weekly carload reports with only a three-day lag, giving one of the most current looks at shipping demand.

The railroad weakness adds to U.S. economic indicators that have been sending mixed signals. The Institute for Supply Management’s index showed November manufacturing contracted at the fastest pace since 2009 while factory orders in October rose 1.5 percent. Consumers are buying autos at a record pace and November payrolls increased by 211,000, more than economists’ estimates.

Intermodal Traffic

Railroad intermodal traffic, which rose in the previous two quarters, has fallen 1.3 percent since the beginning of October. Intermodal consists mostly of consumer goods that are moved in containers that can be switched between ships, trains and trucks, and accounts for almost half of the industry’s carloads.

The excess inventory that’s dragging on intermodal carloads is also hurting U.S. growth, said Tim Quinlan, an economist at Wells Fargo & Co. The economy in the fourth quarter may expand about 1.5 percent at an annualized rate, he said. Growth was 2.2 percent in the third quarter from a year earlier.

Significant Drag

“That slowing is due mostly to a drag from net exports and a significant drag from inventories,” Quinlan said.

Wells Fargo’s fourth-quarter outlook is more pessimistic than the 2.2 percent growth predicted by economists on average, according to data compiled by Bloomberg. Economists, such as Gus Faucher of PNC Financial Services Group Inc., see job and wage growth powering the economy though industrial weakness.

“Even if inventories are a drag and even if manufacturing is a drag, consumer spending growth remains very solid,” Faucher said.

Indeed, one of the few bright spots for railroads is automobile shipments, which have climbed 6.3 percent so far this quarter. Coal, which is the largest single commodity that rails haul, fell 16 percent since the beginning of October while petroleum products dropped 19 percent and metals plummeted 23 percent.

Union Pacific, the largest publicly traded railroad, dropped 34 percent to $78.31 this year through Friday and CSX Corp., the biggest railroad in the eastern U.S., declined 26 percent to $26.86.

Rail and truck stocks have pointed to economic weakness the entire year, said Jason Seidl, a railroad and trucking analyst at Cowen & Co.

“The economy is sluggish. That’s clear,” Seidl said. “We’ve seen a slowdown for sure.”