FTR’s Shippers Conditions Index shows growth for the time being

The most recent edition of the Shippers Conditions Index (SCI) from FTR showed solid gains for the fourth straight month, with market trends remaining favorable for shippers.

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.”

In February, the most recent month for which data is available, the SCI came in at 4.7, which was ahead of January’s 4.3, December’s 3.0, and November’s -0.6 (which was an improvement over October’s -3.1).

Looking ahead, FTR said that the SCI is expected to remain positive in 2016 prior to tailing off closer to the end of the year and through 2018, due to an expected “capacity crunch,” with capacity still currently loose for all modes and subsequently alleviating pressure on labor and shipping expenses, with the freight economy continuing to ease through this year. 

“Although the SCI has retreated somewhat it still remains in positive territory,” said Larry Gross, Partner and Senior Consultant at FTR, in a statement. “Channel checks with shippers and carriers confirm that relatively favorable conditions from the standpoint of shippers are giving them more sway in carrier negotiations than they have had in some time.  We are forecasting a slow deterioration as the year goes on, but tepid demand growth will continue to keep things relatively calm until the ELD mandate approaches as we move into next year.”

While the economic landscape is muddled with conflicting pros and cons like low gas prices and loose capacity as part of the former and sluggish industrial output and cautious consumers as part of the latter, ongoing uncertainty is having an impact on shippers’ supply chain operations from various perspectives, including strategy, planning, and procurement.

This, in turn, has seen shippers try to lock in more contractual pricing instead of spot pricing, with carriers able to leverage that into future capacity commitments.

Industry stakeholders have told LM 2016 is shaping up to be an interesting one for shippers, depending on economic growth levels and expected significant impact of industry regulations like electronic logging devices, and the possible resumption of motor carriers hours of service rules, among others.

At last week’s NASSTRAC conference in Orlando, industry stakeholders viewed current market conditions as mixed, with many variables, including fuel prices, industrial production, and regulations, standing in the way of growth.