FTR Shippers’ Condition Index shows improving, but temporary, market conditions

While it may be temporary, shippers appear to be dealing with better business conditions than they did about a month ago, according to the recent release of the Shippers’ Condition Index (SCI) from FTR Associates.

FTR said the most recent SCI is at -5.4 percent compared to -11.4 in May, which was the worst SCI reading of this current economic cycle. The firm attributed the 6 point improvement to a slowdown in freight demand growth due to a lull in economic activity, as well as ongoing delays in Federal trucking regulations like driver Hours-of-Service (HOS).

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.

“We are definitely in a soft spot in the economy,” said FTR Senior Consultant Larry Gross in an 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.