Chain of Thought

Been Down So Long It Looks Like Up to Shippers

You might think that, simply by the laws of physics, conditions for shippers would start to improve. Wasn’t it Newton who said something like, “for every action, there’s an equal and opposite reaction”? So you might reasonably expect that having been mired in a down cycle for so long, it’s about time that things got better. You might think that, but you’d be wrong.

We closely monitor the Shippers Conditions Index (SCI) here, a monthly score tabulated by FTR Associates, which compiles a number of factors affecting the transportation environment for shippers. In January, the SCI dropped by more than two full points to -7.1, a score that reflects deteriorating conditions for shippers in the early months of 2013. The score for December 2012 was -4.9.

But wait, it gets worse. According to FTR, the index is forecast to keep moving downward throughout the year, reaching negative double-digit levels by the end of 2013. Any reading below zero means things are already tough for shippers, but a reading below -10 indicates that shipper conditions are at near-critical levels, based on capacity and expected rates. As FTR sees it, “transportation costs will increase as freight continues to grow slowly and capacity is constrained by federal regulations affecting trucking starting this summer.”

“Our forecast for deteriorating conditions for shippers is based primarily on two assumptions: that the economy will continue to grow slowly and that there will be no further delay in the implementation of the revised Hours of Service rules in July of this year,” says Lawrence Gross, senior consultant for FTR. “As of this time we see no cause to change either of these assumptions. Field reports indicate a firming of truck rates, which is unusual since winter is normally a slack period. The courts may yet put a hold on the change in Hours of Service, but the standard for issuing an injunction is quite high. While no one can predict what the court will do, our best assessment is that no injunction will be issued and the changes will go into effect as planned.”

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