May 10, 2013
FTR’s Trucking Conditions Index (TCI) for March as reported in the May 2013 Trucking Update reflected improvement in an already favorable environment for trucking with an additional increase to a reading of 13.12.
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.
Although at the moment the environment for truckers is only mildly favorable, the TCI includes a forward-looking component, and it is this aspect that is pushing the index higher. FTR says continued moderate volume growth, when combined with the effects of new trucking regulations, including the Hours of Service revision slated to take effect July 1, will cause trucking rates to firm up substantially in the coming months, improving carrier profitability.
“With enforcement of the revised Hours of Service regulations now less than 60 days away, shippers and carriers need to be preparing for the change,”says Larry Gross, senior consultant for FTR. “Although there is still a chance that the court will issue an injunction, this becomes less likely with each passing day.
“FTR estimates an overall productivity reduction of about 3 percent from the changes in hours-of-service, but this will vary widely depending on the characteristics of each carrier and shipper. Removal of 3 percent of trucking capacity should be enough to start rates on a solid upward trajectory. If regulators continue to roll out the additional regulatory changes already in the pipeline and freight continues to grow at even a moderate pace, tight conditions could continue for several years.”