According to transportation forecasting firm FTR Associates, its Trucking Conditions Index (TCI) for April, as reported in its June Trucking Update, “reflects a strongly favorable environment for trucking” as the TCI increased another 0.7 points for the month to a reading of 13.8.
FTR noted its TCI summarizes various industry metrics and when it has a reading above zero, it indicates a “generally positive environment for truckers.” And readings above 10-- as they stand now—“signal that volumes, prices, and margins are likely to be in a solidly favorable range for trucking companies.”
The firm explained that “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.” FTR now forecasts that new regulations will take at least 3% out of trucking capacity.
In addition, per FTR, a soft fuel market will keep overall freight rate increases (rates including fuel) below normal recovery levels. However, the firm said it expects a “significant” increase in base prices because the upcoming Hours of Service (HOS) rule changes and other rulings will negatively impact capacity.
Jonathan Starks, director of transportation analysis for FTR, commented, “Recent data point to a fragile manufacturing sector,” said Jonathan Starks, director of transportation analysis for FTR. “This is a concern as industrial movements account for a significant portion of truck freight.
“Despite the concern,” he continued, “I believe that manufacturing is pausing rather than starting a downturn. As long as the modest economic growth continues, trucking should be able to show further growth in 2013.”
Starks said the bigger concern right now is how trucking will react to the HOS changes that go into effect on July 1. “The markets have been in supply-and-demand equilibrium since late in 2011,” he observed. “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% hit to [trucking] productivity is enough to break that equilibrium and generate substantial rate improvement by the end of the year,” STraks added.
FTR’s monthly Trucking Update is a subscription component of its Freight Focus Series and reports data that directly impacts the activity and profitability of truck fleets. As part of the Trucking Update, FTR said it forecasts expected trends in this data and the probable short- and long- term consequences.