FTR Shippers’ Condition Index is flat from December to January

The most recent edition of the Shippers Condition Index (SCI) from FTR Associates showed that business conditions for shippers in January were flat compared to December.

The SCI dropped 0.2 points in January, the most recent month for which data is available, to -4.8, said FTR. December’s SCI was -4.8, and November’s SCI was 6.1. May’s -11.4 was the worst SCI reading of this current economic cycle. 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.

FTR said that this most recent SCI reflects a slow acceleration of freight growth that will continue to drive the index gradually lower over the course of 2012. And the firm pointed out in its March Shippers Update that truck utilization will remain relatively strong until new Hours of Service regulations are implemented next year, which could tighten capacity should freight growth continue at its current rate.

FTR Senior Consultant Larry Gross said that while FTR’s economic forecast is on the conservative side, freight growth will exceed GDP growth, which will keep capacity tight and keep freight rates up.

In an interview with LM, Gross said that freight transportation is currently in a period of stability, barring some exterior event like Middle East conflicts or something along those lines. But he cautioned that this stability has a bias towards tightening.

“As time goes on, we feel things will get better for carriers and more adverse for shippers,” Gross said. “We have to keep in mind, of course, that we are just coming out of the slack season, specifically with the increase from February to March being the biggest month-to-month increase of the year. That is not to say March is the busiest month of the year, because it is not. It is just the biggest one-month jump.”

Because this is the biggest monthly gain, Gross said it requires industry stakeholders to “step up their game” to a large degree.

Another thing to be cognizant of, explained Gross, is that even though the economy is again showing signs of recovering, shippers are being cautious because there is still a concern over whether the momentum occurring now will be sustained or not.

“Folks are hedging to the conservative side and from a freight perspective, I would say the absence of a big inventory re-build (which happened during the first half of both 2011 and 2012) is actually bullish, because it shows the levels we are now seeing are less vulnerable,” explained Gross.

And ongoing recent strength in the services sector, which was conspicuously absent in the recovery before, is now gaining momentum, too, which Gross said is a good sign as it represents up to 80 percent of economic activity.