July 10, 2013
FTR’s Trucking Conditions Index (TCI) for May as reported in the July 2013 Trucking Update at 12.4 is unchanged from the previous month, and continues to reflect a positive environment for trucking.
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 signal volumes, prices, and margins are likely to be in a solidly favorable range for trucking companies.
The current positive TCI level is based on expectations of rising rates and margins due to tightening capacity conditions, and FTR expects these conditions to continue indefinitely, either until the next round of trucking regulations are rolled out that will further tighten capacity or an unexpected recession significantly reduces freight demand.
Further FTR analysis shows strong year-over-year volume growth in truck freight, but, monthly growth has slowed and that should persist over the next few quarters in part due to slowing industrial production.
“The trucking industry has seemingly been stuck in a holding pattern for the last year or so. Rates have only moved slightly higher and freight growth, while strong at the end of 2012 and early in 2013, has generally been modest,” Jonathan Starks, director of transportation analysis for FTR, says.
Barring an external change in the marketplace FTR believes Hours of Service changes, in conjunction with the other numerous regulations already implemented or soon to be, will be enough to change the supply and demand equation in favor of the truck fleet.
“That is why we expect a noticeable uptick in rates by the end of the year,” Starks says. “The weaker manufacturing sector has probably limited any chances of seeing a true capacity crisis in 2013 – we need some additional economic growth to envision that possibility.”
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. As part of the Trucking Update, FTR forecasts expected trends in this data and the probable short and long term consequences. July’s Notes by the Dashboard Light commentary discusses truckload pricing and why it has not risen as much as expected