While the trucking sector appears to be regaining its footing to an extent, the most recent edition of the Trucking Conditions Index (TCI) from freight transportation consultancy FTR shows that it is happening at a somewhat lower rate in advance of a potential expected capacity reduction next year.
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.
For October, the most recent month for which data is available, the TCI came in at 2.84 compared to September’s 5.47. In June, July, and August, the TCI came in at 2.93, 5.99, and 6.76, respectively. May’s 1.69 was the lowest level for the TCI since 2011.
FTR said that this reading reflects the continuation of a current pullback ahead of expected 2017 capacity tightening, with the TCI , which is still in “low positive territory,” expected to reflect improving conditions for carriers when capacity tightens due to regulations being implemented, something which FTR said will improve pricing and margins for carriers through 2017. And it also noted that the TCI is expected to reach its peak in late 2017 or early 2018.
“Despite the pullback in the October TCI there is sufficient evidence in the marketplace to indicate a turnaround is in the works for truckers,” said FTR COO Jonathan Starks in a statement. “The spot market has shown a dramatic change with posted loads showing a 40% increase in November versus last year. Combine that with the recent reductions in truck capacity that have finally occurred, and you arrive at a market that is set to see year-over-year rate increases for the first time since the second quarter of 2015. That is 80+ weeks of negative results - even a small improvement will feel really good about now. The change in administration at the White House creates some inherent uncertainty, but we will have a better picture of a Donald Trump presidency fairly soon. The biggest unknown is the impact of ELDs on the marketplace in 2017. If regulations are delayed or expunged, the impact on 2017 will be muted and pricing won’t be as strong as expected. However, the market is already showing a positive shift, and the negative pricing of the last two years is unlikely to last much longer.”
What’s more, the freight environment remains in a pattern of largely flat growth, although there have been recent signs for optimism, including a better than expected third quarter GDP estimated over 3 percent, decent job growth figures, and signs of increased consumer spending.
But these alone have not been consistent enough to translate into sustained economic growth, coupled with excess trucking capacity still being hampered by elevated inventories, which have shown signs of heading down recently.
Extract taken from https://goo.gl/HqkVll
By LM staff