Despite decline in TCI, FTR is confident in direction of trucking market

Coming off a nearly 2.5 point increase from January to February, the Trucking Conditions Index from freight transportation consultancy FTR, which was issued today, fell back to more familiar territory. 

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 10 indicating that volumes, prices and margin are in a good range for carriers.

For March, the most recent month for which data is available, the TCI was 2.97, a 2.14 decline from February’s reading.

Even with the sequential decline, FTR is confident that the trucking market will improve over the course of 2017, citing gains in spot rates serving as “an indication that a market-wide move to capacity tightness is on the way with a correlating upswing in the index throughout 2017 and into 2018,” adding it is confident in the freight market for 2017 with the first quarter showing growth, even though the firm’s forecast has lessened somewhat due to some regulatory headwinds coming at the end of 2017 and into 2018.

In last month’s edition of the TCI, FTR noted that it expects the TCI to be within close range of a double-digit reading by the end of 2017, due to freight growth and the aforementioned regulatory headwinds. And it added that it expects loadings to be up 4 percent annually, with contract rates not expected to see material gains until at least October.

“The TCI has settled into a positive, but not robust, level of market conditions over the last 12 months,” said FTR COO Jonathan Starks in a statement. “The main reasons for the reduction in the March TCI stems from slightly weaker freight activity, reduced estimates of capacity tightness, and continued weaker-than-expected conditions for contract rates. Trucking conditions are likely to stay in this moderate range until late this year when the Electronic Logging Device (ELD) mandate comes into effect. Once you combine the productivity hit coming from full implementation of ELDs with continued freight growth and the capacity reductions that have already occurred, you get a market that is poised to see significant movement in rates. Recent spot market activity shows that some of these trends are already underway. Truckstop.com’s Market Demand Index (MDI), a measure of tightness in the freight-matching sector, is up nearly 100% compared to this time last year, and prices are now showing 5% y/y gains - enough of a move to convince us that the market is continuing to turn in a carriers direction.”