While the previous edition of the Shippers Conditions Index (SCI) from freight transportation consultancy FTR showed some encouraging signs for shippers in terms of a mild uptick in overall market conditions, the current edition points to softer market conditions that have slowed for now and rate increases that are expected to have a negative impact on shipper costs.
FTR describes the SCI as an indicator that sums up all market influences that affect shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”
For June, the most recent month for which data is available, the SCI was -2.0, which is a 1.1 percent gain over May’s -3.1 and a 2.9 percent jump from April’s -4.9.
Among the factors cited by FTR for the current SCI reading are slowing GDP growth and a “change in growth towards services [that] has dramatically softened freight markets for both truckload and rail. What’s more, even with numbers still in negative territory in conjunction with freight growth slowing and low fuel prices, FTR said the SCI could still end up in positive territory between now and the end of 2015.
“Line-haul rates are but one aspect of a shippers overall logistics budget,” said Jonathan Starks, FTR Director of Transportation Analysis, in the report. “However, it is one of the more variable elements and that makes it a very visible piece. This is easily seen in the wide swing in truckload spot prices over the last year. Data from loadboard Truckstop.com shows that rates were up as much as 20% during 2014, and now they are down nearly 15% in the middle of 2015. Big drops in fuel prices account for about half of the decline, and continued price drops at the pump indicate that it will persist for some time. Global pressures have risen of late and are a detriment to demand for both shippers and transportation companies. Export activity has weakened considerably, and Chinese issues have rattled stock markets both at home and around the globe. Concerns for a recession certainly increase any time you have a lot of volatility occurring in markets. Right now is no exception, although I still feel that the U.S. is a more isolated arena and should be able to withstand the current environment without major disruption to our domestic economy.”