If things are improving for shippers lately, there is a chance that it will not be lasting, according to the most recent edition of the Shipper Conditions Index (SCI) from freight transportation consultancy FTR Associates.
March’s SCI, which represents data for the most recent month available, was -7.3, marking an improvement from February’s -9.5. A reading above 0 suggests a favorable shipping environment, and 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. May 2011’s -11.4 was the worst SCI reading of this current economic cycle.
FTR officials said that trucking capacity and supply remain in “precarious balance…with very limited demand growth keeping shipping costs in check.” But the firm cautioned that shipping conditions are expected to deteriorate, due to seasonal freight gains and the pending July 1 Hours-of-Service (HOS) changes that are expected to limit driver productivity and cut available trucking capacity by 3 percent or more, according to industry estimates.
“Current shipping conditions remain calm but storm clouds are on the horizon,” said Larry Gross, FTR Senior Consultant, in a statement. “Every indication is that the Hours of Service regulatory changes will occur as scheduled July 1, which FTR projects will reduce trucking productivity by about 3 percent. While our estimate of the productivity hit is less severe than some, even a 3 percent decline will be sufficient to tip the balance of supply and demand significantly away from shippers, assuming the economy continues to maintain at least the anemic growth levels seen recently. This will usher in an extended period of difficulty for shippers, as there is an array of new regulations lined up behind the HOS change that will further impact trucking in the months and even years to come.”
Gross recently told LM that back in 2004 there was a combination of a change in HOS and a growing economy, which resulted in about two years of freight increases.
“Now, this year, we have a raft of regulatory changes, plus a growing economy, with the new HOS rules as currently constructed likely to stand,” he said. “We are setting ourselves up for a 2004 replay, but the pressure on the driver supply and capacity is going to be considerably longer than the one-shot event that occurred in 2004. So we see the prospect for a negative rate environment extending much further.”