FTR’s Trucking Conditions Index dips with expectations high for 2016

Mixed themes in the trucking sector were apparent in the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR.

For the month of September, the TCI fell to 8.46, which was down from August’s 9.53 and ahead of July’s 8.07. 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.

From May through August, the TCI had seen sequential gains, with FTR saying in October’s TCI release that conditions were expected to remain in that range through the end of the year and followed by “upward momentum” in 2016, due in part to new regulations crimping capacity.

The firm said last week that the TCI overall has been uneven in 2015 and is likely to decline more as the year comes to a close, adding that the market environment is still in a fragile equilibrium between freight growth while capacity utilization has lowered but is still high. As for pricing, it said rate growth has been very modest with rate increases expected in 2016, which will subsequently reflect a more positive TCI in 2016. 

“Inventory destocking, sluggish trade, and weak manufacturing have created an environment much different than last year for truckers and transportation professionals,” said FTR Director of Transportation Analysis Jonathan Starks in a statement. “While overall capacity is relatively tight, there is a dichotomy between what is seen in the contract potion versus the spot market. As supply has increased relative to demand, loads have moved back to the contract and dedicated markets that ran out of excess capacity in 2014 due to regulations and weather. The spot market, on the other hand, is showing definite weakness, with load activity weak, truck supply up significantly, and rates down from prior year. Contract rates continue to rise, although they have started to show some slowing. The market is relatively stable, with the major risk coming from a potential slowdown in freight demand due to the items mentioned earlier. If slow growth in the economy continues, the next significant change in market conditions isn’t expected until fleets start implementing the coming regulations. That is likely to occur in the second half of 2016.”