FTR’s Shippers Conditions Index points to a potentially challenging 2017 for shippers

Even with a slight gain, the most recent edition of the Shippers Condition Index (SCI) from freight transportation consultancy FTR does not point to what appears to be a promising outlook for shippers this year.

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.”

For November, the most recent month for which data is available, the SCI came in at 1.4, which was ahead of October’s 0.4 and September’s -2.4. While improving, FTR made it clear that these low SCI levels signal what it called steadily deteriorating conditions throughout 2017 for shippers, with capacity tightening as demand picks up, coupled with the December electronic logging devices (ELD) mandate. And the firm added that 2017 is expected to pose “upside risks” truckload rates paid by shippers, due to a tightened market, possible oil inflation, and the possibility of general inflation. 

“Although many shippers are saying, ‘We will believe it when we see it,’ our thesis that truck capacity will tighten significantly over the course of 2017 remains intact,” said Larry Gross, Partner and Senior Consultant at FTR, in a statement. “Some may believe that the course of this mainly regulatory-driven event will be altered by the Trump administration, but our expectation is that the key change, namely the mandate for ELDs, will take effect in December as planned. This will cause substantial deterioration in the SCI over the course of this year.  While the pace and even the magnitude of the deterioration is still somewhat uncertain, shippers would be wise to lay in contingency plans for dealing with this significant event.”

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.