Based on complex economic models, L. E. Peabody & Associates, Inc. forecasts several published price and cost indices and prices for various commodities. Our proprietary forecasting models reflect historical data and the underlying changes in trends that impact prices, costs and indices. Our forecasts include, for example, projections of overall inflation, economic growth trends, production capacity changes, and advancements in technology and productivity and other economic factors.

Forecasts are developed at regular intervals for railroad industry price and cost indices such as the Rail Cost Adjustment Factor (both unadjusted and adjusted for productivity). We also develop forecasts of several U.S. Department of Labor, Bureau of Labor Statistics indices such as the Producer Price Index ("PPI") specific to various commodities and categories of equipment and materials, as well as the PPI general commodity index. The U.S. Department of Commerce, Bureau of Economic Analysis indices that we forecast include both the Gross Domestic Product/Implicit Price Deflator ("GDP/IPD") index and several specific component GDP/IPD indices. L. E. Peabody & Associates, Inc. also forecasts fuel surcharges, coal prices, natural gas prices, crude oil prices on a regional basis, as well as the New York Mercantile Exchange Futures Prices for natural gas. While forecasts of general industry indices are available from the Firm, L. E. Peabody & Associates, Inc. also provides unique contract specific indices (or market basket of indices) utilized by our clients.

The Firm has also developed an economic model that forecasts changes in a railroad's annual costs and unit costs. Major inputs into the model include projected changes in traffic levels, commodities handled, movement characteristics, productivity, and inflation.


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