Growth prospects for the trucking sector appear to remain on solid footing, according to the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR.
In November 2015, the most recent month for which data is available, the TCI saw a sizable 3.58 percent jump to 8.64, following 3.4 percent drop off from September to October while halting a sequence of declines in recent months, too.
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.
FTR said that December’s reading serves as a potential reflection of expected improvements for the trucking sector in 2016, with shipper concern over tight capacity expected to grow during the second half of 2016 (due largely to the late 2017 electronic logging device mandate). The firm said this will boost the carrier environment, but added that there could be cause for concern for carriers should freight levels don’t grow as forecasted because of low industrial output.
“The market seems to be in a momentary flux as we end 2015 and prepare for 2016,” said Jonathan Starks, Chief Operating Officer at FTR, in a statement. “The news is loaded with reports of rapidly falling oil, chaos in the foreign stock markets, and commodities markets continuing to fall. However, the December jobs report was reasonably strong and most of the U.S. economic data points to a continuation of modest growth domestically. Inventory levels do remain a concern, but if they are concentrated in the retail sector there are less drastic measures needed to get manufacturing going again.”
And he added that the ISM Manufacturing Index was again below the critical 50 mark in December, but it did not decelerate further, and a modest rebound in manufacturing is expected by mid-year.
“If that holds true, then the modestly tight market that has embodied truck capacity for the last year should keep pressure on rate growth to stay positive and capacity to start to tighten in late 2016, ahead of implementation of several key regulations in 2017 - with speed limiters and ELDs topping that long list,” he said. “Our initial take for 2016 is to expect some more of the same - modestly tight conditions in contract segments and somewhat looser conditions for spot activity. However, with the economic data not clearly pointing to an acceleration in growth, the fleets’ position is somewhat tenuous, and the downside risks do seem to be increasing.”