FTR Shippers’ Condition Index continues on an upward path

As was the case a month ago, FTR Associates reported that while business conditions remain largely uncertain, things are improving for shippers.

That was the consensus of the firm’s most recent edition of its Shippers’ Condition Index (SCI). The SCI is based on “all market influences that affect shippers,” with a reading of zero reflecting a solid environment and anything below zero reflecting an unfavorable environment.

The most recent SCI reading is -3.6, which is up from -5.4 in June and -11.4 in May, which marked the worst SCI reading of this current economic cycle, according to FTR. FTR explained that even though overall conditions remain “unfavorable from the standpoint of the shipper,” things are not as bad as they were earlier in the year.

But it cautioned that the road to improvement will not be smooth, because once the rate of economic growth kicks in throughout the rest of the year, the SCI is likely to decline, due to strained freight capacity caused by higher demand.

“We are definitely in a soft spot in the economy,” said FTR Senior Consultant Larry Gross in a recent interview. “Recoveries never happen in a straight line. There are always going to be ups and downs and that is what is happening now. And there are also outside events like the Japanese Tsunami and earthquake, Libya and oil prices, and government spending that also has an impact, too.”

From a shipper’s standpoint, Gross stressed it would be unwise to plan against tight capacity and increased rates in coming months, as the SCI rebound is likely to be a very short-term affair.

Gross added that once the economy resumes a positive growth path it is likely that the SCI will again result in slower growth, due to trucking regulations taking hold and rates increasing through next year as fuel, equipment, and labor costs rise faster than the general rate of inflation.