FTR’s Shipper Conditions Index shows slight improvement as capacity remains tight
June 19, 2014
While over-the-road capacity availability remains tight, the outlook is not quite as dire as it was earlier this year. That was a major theme in the most recent edition of the Shippers Condition Index (SCI) released this week by freight transportation consultancy FTR.
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 and a “less-than-ideal environment for shippers.”
In April, which represents data for the most recent month available, the SCI was -7.7, which FTR said reflects “a mild pullback from a critical capacity possibility” that was evident in the March edition of the SCI at -8.7. But even with the slight improvement in the April SCI, FTR made it clear that a slight sequential improvement does not represent a significant improvement on the truck capacity front, as it remains very tight.
What’s more, FTR observed that the current SCI reading infers that current truck capacity utilization is in the 98 percent-99 percent range and shows little sign of abating until another recession takes hold, adding that current freight growth is expected to be strong throughout the rest of 2014, with trucking rates expected to continue heading up.
FTR President Eric Starks said in the report that the shipping situation is not as critical as it was just a few months ago when weather related issues disrupted the supply chain.
“However, we are still near a tipping point,” he said in a statement. “If the economy starts to accelerate as we move through the summer months, additional strain would be put on an already fragile capacity situation. Shippers should expect carriers to push rates higher as we move through the year. The biggest pressure will come from trucking companies who continue to struggle finding qualified drivers to move freight.”
Starks added in an interview with LM that the current situation is interesting in that things continue to be strong in a sense that capacity is relatively tight but not critical in any way, while rate pressure on the truckload side remains intact.
But he noted that there is a caveat with some of the issues shippers were dealing with earlier in the year, notably the harsh winter weather, have abated.
“The winter created a huge capacity crunch as shippers were scrambling to find equipment,” he explained. “That is over now, buy the driver shortage situation remains an issue and is a major problem that carriers really cannot stress enough. We are kind of at an odd spot right now, because it really won’t take much of an economic pick up to push us back to that critical spot again where we were last winter. If we start seeing the economy heating up at all, it could create some problems as things are already on the edge.”
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