July 18, 2013
FTR Associates says its Shippers Conditions Index (SCI) for May was basically unchanged from the level of the last few months at a -7.5 reading.
The Shippers Conditions Index is a compilation of factors affecting shippers transport environment. Any reading below zero indicates a less-than-ideal environment for shippers. Readings below 10 signal that conditions for shippers are approaching critical levels, based on available capacity and expected rates.
“The sluggish economy and freight environment that has persisted for nearly two years now, has created an environment in which shippers have been able to secure low rate increases despite fleets operating with fairly small amounts of spare capacity,” Jonathan Starks, director of transportation analysis for FTR, says. “The introduction of more restrictive Hours-of-Service regulations for drivers on July 1 means that the amount of excess capacity in the system has shrunk even more. As long as freight levels continue to inch upward truck rates are likely to begin a more significant pattern of increases. If nothing else, fleets will be looking to cover their increased operating costs for drivers, in addition to taking advantage of the reduction in spare capacity that generally drives upward movement in truck rates.”
FTR Associates says the SCI level is indicative of tight capacity but only modest rate hikes by truckload carriers, and the rate picture has continued to be quiet assisted by lower fuel surcharges versus a year ago.
However, FTR is forecasting an acceleration in rates for the second half of the year at the same time new regulations take capacity out of trucking. This convergence of negative factors for shippers will be reflected in a declining SCI.
Details of the factors affecting the May Shippers Conditions Index are found in the July issue of FTR’s Shippers Update published July 12.