Declining economic conditions have a negative impact on FTR’s Trucking Conditions Index

Soft economic conditions impacting the trucking sector appear to have officially become mushy, based on the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR.

The TCI reflects tightening conditions for hauling capacity and is comprised of various metrics, including capacity, fuel, bankruptcies, cost of capital, and freight.

According to FTR, a TCI reading above zero represents an adequate trucking environment, with readings above ten indicating that volumes, prices, and margin are in a good range for carriers.

For March, the most recent month for which data is available, the TCI fell nearly 50 percent from February’s 8.27 to 4.22, marking its lowest level since 2011, according to FTR.

FTR cited various factors for the steep decline, including weak Q1 economics (including a GDP reading of 0.5), as well as downside risks that could prevent any real upward movement until later in the year, coupled with truck loadings and the freight market being consistent with a slow growth environment, with the possibility that there is more room for conditions to tail off.

What’s more, FTR said pending regulations, like ELD and HOS, with the ability to hinder trucking productivity could further impact the TCI in 2017 and 2018, should capacity become negatively impacted due to these regulations. 

“The freight markets have slowed significantly over the last year with March volumes just 1.5 percent above year ago levels,” said Jonathan Starks, Chief Operating Officer at FTR, in a statement. “On a seasonally-adjusted basis, volumes were lower in March than what was seen in July of last year. The market has essentially moved sideways for more than half a year. The good news is that manufacturing looks to be growing again, and the consumer hasn’t stopped spending. The bad news is that manufacturing output will remain weak during most of 2016, and consumer spending hasn’t grown strong enough to make up the difference. Add in the serious inventory glut that has persisted since early 2015, and there is little to call for a significant change in the carriers operating environment for 2016.”

On top of all these moving parts one surprise cited by Starks has been the sharply negative environment for contract rates in early 2016, which he explained has occurred at the same time that spot market rates have finally stabilized.

“I believe it is a delayed response to the 2015 easing of capacity combined with rising fuel prices that has hurt the contract market this year,” he said. “Weak rate growth will persist but not at the negative level that we are currently seeing, especially once we hit 2017 and the regulatory pressures begin to increase.”