Trucking conditions improving
FTR’s Trucking Conditions Index (TCI) is trending upward.
As reported in the June 2013 Trucking Update reflects a strongly favorable environment for trucking was recorded in April, increasing another 0.7 points for the month to a reading of 13.8.
FTR says the TCI is designed to summarize a full collection of industry metrics, with a reading above zero indicating a generally positive environment for truckers. Readings above 10, as they are now, signal that volumes, prices, and margins are likely to be in a solidly favorable range for trucking companies.
Modest rate increases are expected to resume as freight enjoys reasonable volume growth alongside the reduced trucking productivity that is the result of increased regulations.
“Recent data point to a fragile manufacturing sector,” Jonathan Starks, director of transportation analysis for FTR, says. “This is a concern as industrial movements account for a significant portion of truck freight. Despite the concern I believe that manufacturing is pausing rather than starting a downturn.”
It is forecast that new regulations will take at least 3 percent out of trucking capacity. A soft fuel market will keep overall freight rate increases (rates including fuel) below normal recovery levels. However, FTR expects a significant increase in base prices due to the effects of Hours of Service and other rulings negatively impacting trucking capacity.
“As long as the modest economic growth continues, trucking should be able to show further growth in 2013,” Starks adds. “The bigger concern is how the industry reacts to the fast approaching Hours of Service start on July 1. The markets have been in supply and demand equilibrium since late in 2011. As such, rates have been very stagnant amid a strong TCI reading because the market tends to react to changes in market conditions. We believe that our expected 3 percent hit to productivity is enough to break that equilibrium and generate substantial rate improvement by the end of the year.”
The Trucking Update, published monthly, is part of FTR’s Freight Focus Series and reports data that directly impacts the activity and profitability of truck fleets.