FTR’s Shippers Condition Index shows some improvement

Freight transportation consultancy FTR Associates reported today that its Shipper Conditions Index (SCI) showed signs of improvement for the month of October.

October’s SCI, which represents data for the most recent month available, was -5.0, which represents an almost 2 point improvement from September’s -6.9. 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.

According to FTR, the range where the SCI “settles” indicates the current status of stable but slightly tight truck capacity, adding that shippers may see a bit of deterioration in shipping conditions through the end of 2012 and throughout 2013, while freight demand slowly improves and regulations such as CSA and HOS have a negative impact on driver production and in turn capacity.

And while the capacity situation is not expected to reach what FTR called an acute phase, the firm said it will be sufficient enough to result in higher rates for shippers.

“Shippers need to be aware that the current relatively benign conditions are not expected to last,” said FTR Senior Consultant Larry Gross in the report. “The fundamentals of our economy are improving and will continue to do so unless our government snatches defeat from the jaws of victory by failing to reach a fiscal cliff agreement in a reasonably timely fashion.  Areas of strength include a recovering housing sector and low energy prices.  Changes in trucking regulations are looming although court challenges may yet throw a monkey wrench into the proceedings, delaying implementation and the resulting tightening of capacity.  But putting it all together, FTR feels the most likely outcome will be a more difficult scenario for shippers in 2013”.

In a recent interview with LM, Gross said that while there is a program in place for conditions to change that is visible, continued growth colliding with the various restrictions being programmed into certain regulations will likely create a different situation for shippers by this time next year.

“If we do in fact go off the fiscal cliff, the forecast of a tightening supply in trucking is likely obsolete as a recession could follow and there would not be as much demand,” he said. “I am assuming there is a solution and that people in Washington are not so stupid as to drive us off.”