Norfolk Southern Corp. (NSC) has boosted capacity by returning nearly a third of its parked railroad fleet to service in a further sign of a U.S. economic recovery.

More than a quarter of the U.S. rail car fleet has been put into storage this year as the broad downturn dried up demand for freight transport, according to some estimates.

Union Pacific Corp. (UNP) said last month that it had begun using some of its parked cars and locomotives again because of improved conditions in some markets.

Norfolk Southern executives echoed that sentiment in an interview Wednesday, noting improvements in the steel, coal and automotive sectors.

They said about 9,500 of the 35,000 freight cars stored by the company have been brought back into service over the past six weeks, as have about 200 of the 700 parked locomotives.

Norfolk Southern still has about a quarter of its rail car fleet and about 14% of its locomotive fleet in storage.

Chief Operating Officer Mark Manion declined to predict if more of the idled capacity will be brought back in coming weeks. He said that the trend "totally depends on what we see from here" in terms of demand for freight transport.

But both Manion and Chief Marketing Officer Donald Seale expressed cautious optimism, albeit stressing that they don't expect a rapid recovery for the broad economy.

Seale said Norfolk Southern's freight volumes are down about 19.5% overall so far in the third quarter compared to the year-ago period, a big drop but an improvement nonetheless from the second quarter's 26% year-over-year decline.

"We are bumping along the bottom (and) making some headway in some markets," Seale said. "We are somewhat encouraged (but) we know it is going to take some time for a recovery from this deep in the recession."

He cited steel production among the sectors recently showing signs of life, saying blast furnaces have been restarted in Alabama, Illinois and Ohio. The trend has led to an uptick in transport of finished and semi-finished steel products, as well as in shipments of coal used in steel production.

The automotive sector also has improved, Seale said. He credited the federal "cash for clunkers" stimulus effort but said he thinks the trend can continue even following the end of the program because inventories are extremely low.

Union Pacific said last month that it had brought back into service about 11,000 of the peak 71,000 freight cars it had in storage in May, and 200 of the 2,100 locomotives.

CSX Corp. (CSX) said this week that it hasn't initiated any major effort to bring back into service its estimated 30,000 stored freight cars and 640 stored locomotives. Burlington Northern Santa Fe Corp. (BNI) declined to comment.

-By Bob Sechler; Dow Jones Newswires; 512-394-0285; bob.sechler@dowjones.com