FTR’s Trucking Conditions Index sees sequential gains

Aided by capacity-tightening regulations that are augmenting pricing and margins for motor carriers, the most recent edition of the Trucking Conditions Index (TCI) from freight transportation consultancy FTR headed up from July to August, FTR said this week.

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.

For August, the most recent month for which data is available, the TCI increased to 6.76 from July’s 5.99, which was up from June’s 2.92, and May’s 1.69, which was its lowest reading going back to 2011.

FTR explained that the gain seen in August was expected and forecasted to remain in that ranged through the end of 2016 and into 2017, with new regulations tightening capacity, coupled with better pricing and margins for carriers, while the economy and freight markets remain in what it called a slow growth phase with unclear direction typical of a late recovery environment., with the TCI expected to peak in early 2018.

“The July and August increases in the Trucking Conditions Index were led by positive changes in capacity utilization and fuel prices,” said FTR COO Jonathan Starks in a statement. “Fuel prices look to have stabilized during the fall and are unlikely to have a big impact on transportation markets until oil prices move substantially away from $50 per barrel. Also, despite the weak reports from the public TL carriers, utilization of the overall fleet is showing some moderate improvement. This trend is likely to be subdued until mid-2017 when we get close to the implementation data for electronic logging devices. The third quarter is likely to be the nadir for weak reports, and we should begin to see economic improvement, easier year-over-year comparisons, and better overall market conditions as capacity tightens up due to regulations. Spot market conditions are beginning to affirm this, with the dry van market on Truckstop.com showing positive year-over-year comparisons for both load volumes and rates.”

While the TCI shows some decent sequential gains in recent months, data issued in the last week by the American Trucking Associations and Cass Information Systems shows there is much more room to run on the road to more growth.

As previously reported in LM, ATA’s September data was less than encouraging, especially when compared to a promising August, which led industry stakeholders to potentially thinking perhaps the tides were turning in the form of some consistent positive volumes.

But September’s truck tonnage data squelched that optimism. After seeing a 5 percent sequential August gain for its seasonally-adjusted For-Hire Truck Tonnage Index, September was down 5.8 percent, wiping out the previous gain altogether.  What’s more, it was also down 0.7 percent annually for its first annual decline going back to October 2015, an 11-month stretch.

And the ATA’s not seasonally adjusted index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, dropped 5.1 percent from August to September and was off 1.2 percent annually.

ATA Chief Economist Bob Costello pointed to volatility remaining intact in September, adding that the changes in tonnage that are occurring are typical seasonal trends that are making it difficult to discern real or clear truck tonnage trends.

And he also noted that the freight environment at the moment is softer than normal and will remain the case until the inventory correction is complete, coupled with the fact that this slow growth environment does not lend meaningful support to stronger volumes in the coming months.

As for the Cass data, September shipments both saw declines, down 0.4 from August and 3.1 percent annually, while freight expenditures were mixed, down 3.8 percent annually and up 5.2 percent compared to August, which it attributed to gains in fuel over the last six months and not to pricing power increases for any specific mode.

Like the ATA’s data, Cass was down overall what it called a “glimmer of ‘less bad’ hope in August.”

The report explained that September’s data presents the working thesis that overall shipment volumes and pricing levels remain weak in most modes, with increased levels of volatility at all levels of the supply chain like manufacturing, wholesale, and retail, which continue to endeavor to work off high inventory levels.

But Cass also observed that it’s not all doom and gloom either, as there are some growth pockets, including those related to e-commerce and lower expansion levels for modes serving the auto and housing/construction sectors, which collectively led to lower shipment numbers.