FTR Shippers Condition Index is in neutral prior to expected extended decline

Following a decline in September, the Shippers Conditions Index from freight transportation consultancy FTR was neutral in October, the most recent month for which data is available.

FTR describes the SCI as an indicator that sums up all market influences that affect the transport environment for shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”

The October SCI was 0.4, which is ahead of September’s -2.4, which FTR described as a “pause” before an expected 2017 decline, brought about by a meshing of pending regulations and expected increases in freight rates and economic improvement. And FTR added that market conditions might remain neutral for shippers for a few months in advance of “an extended plunge in the metric” that could continue into 2019.

“Market activity for trucking is beginning to improve, a combination of higher volumes and less truck capacity in operation,” said FTR COO Jonathan Starks in a statement. “This trend should continue and will lead to higher rates and the potential for lower service levels. If you view the spot market as an early indicator, then we have seen steady improvement in loads and rates since this fall. Shippers likely won’t be impacted well into 2017. Contract rates are still low and higher movement in this arena isn’t likely until after the winter bid season. I wouldn’t expect to see any significant improvement in contract rates until the latter half of 2017. The main reason is that the real capacity issues stem from the Electronic Logging Device (ELD) implementation that is scheduled for the end of 2017.”

While there are many unknowns germane to the current state of the freight economy, what happens with capacity in the next year remains a wildcard to a degree in trying to gauge how it will impact pricing.

But there are some encouraging signs on the economic front, too, that could go a long way in bringing back a return, of sorts, to a more stable demand and volume environment and tighten up capacity, too, including signs of inventories dropping, increased consumer spending, decent manufacturing and industrial production output, and the recent third quarter GDP estimate of 3.2 percent, its highest level in more than two years.