The most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR showed a decline from September to October, the most recent month for which data is available, but the firm said it was not unexpected, as market conditions are poised to improve in 2016 in tandem with potentially tight capacity in the second half of next year.
In October, the TCI dropped 3.4 percent from September’s 8.46 to 5.06, which continues a recent stretch of declines, with August at 9.53 and July at 8.07.
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.
From May through August, the TCI had seen sequential gains, with FTR saying in October’s TCI release that conditions were expected to remain in that range through the end of the year and followed by “upward momentum” in 2016, due in part to new regulations crimping capacity.
With the expectation of improving trucking conditions next year in conjunction with tighter capacity, FTR said it expects truck loadings to head up by 3 percent or higher next year, which would indicate stronger than expected 2015 results and ongoing economic growth into the coming months.
“The trucking environment has slowed during 2015, but compared to recent history it is still operating at a reasonable level,” said FTR Chief Operating Officer Jonathan Starks in a statement. “Spot market activity is well below what was seen during the very tight conditions that stemmed from last winter’s disruptions. The Market Demand Index from Truckstop.com is down nearly 45 percent from prior year levels and is off even more significantly from the highs seen earlier last year. However, pricing on the contract portion of business has held up better than expected. Shippers seem to be choosing capacity over cost savings – especially when it comes to their core carrier base. This is a relatively easy choice given the downward moving fuel markets. The easy fuel comparisons are expected to change in 2016, and that will make it more difficult for shippers to be as lenient on trucker’s base rates. We expect conditions to improve as we move through the year as the market further prepares for tight truck capacity when the HOS, ELD, and speed governor rules are implemented over the next two years.
Starks added that the chief concern at the moment is weakness in manufacturing and high inventory levels, with the latter needing to be corrected before increased manufacturing activity returns in earnest. Starks said it is possible that could happen early next year, pointing to the recent ISM Manufacturing Index release contracting in November as an early signal for what he called “a necessary correction.”