FTR Trucking Conditions Index points to carriers gaining increased traction in market

On the heels of slight decreases over the prior two months, the trucking market displayed some positive momentum, according to the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR.

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On the heels of slight decreases over the prior two months, the trucking market displayed some positive momentum, according to 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.

In June, the TCI came in at 7.64, which FTR said is indicative of market conditions that see carriers gaining traction in the market although rates are not keeping up with cost inflation. FTR said that the TCI rose 1.9 percent from May to June, while April and May were cumulatively below the first quarter average of 8.35.

“The headline number of 4 percent for GDP growth in the second quarter is getting plenty of news but the real number for getting a sense of true demand in this economy is the Final Sales component of GDP,” said FTR Director of Transportation Analysis Jonathan Starks in a statement. “It stood at 2.3 percent in Q2, well above the -1 percent seen in Q1 but noticeably below the 3.5 percent it averaged during the second half of 2013. Truck freight continues to show steady increases and the capacity situation is unlikely to loosen up any time soon. These good developments are partially offset by slower than expected growth in contract rates. Spot market rates are still elevated, although they have shown normal moderation during the summer months. We expect to see both spot and contract rates continue to rise as we get into the fall shipping season.”

As previously noted, Starks’ points have rang true in all corners of the freight transportation market, especially since winter finally came to an end. Should GDP growth materially increase, industry experts maintain it will become far more difficult for shippers to secure capacity than it already is and could also see them turning more to intermodal in an effort to be less truck-dependent until things improve on the capacity side.

For those shippers that do not view intermodal as an option, they are likely to see further gains in pricing made by carriers they work with.

Should GDP growth continue near 4 percent for two-to-three quarters, it would translate into freight growth in the 9-to-12 percent range, FTR Senior Consultant Noel Perry previously told LM. He explained that this type of growth stress on capacity, which is very tight and almost has no margin for error, could portend a return to 2004 if that growth were to come to fruition, as rates in 2004 climbed 6-to-8 percent following a period of sustained economic growth.

Were that to happen, fleets would begin ordering additional trucks as a result of increased capacity rather than on a replacement level, with Perry noting that substantial production increases would serve as the driver for that.

About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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Article Topics

FTR · TCI · Trucking · All Topics
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