Chain of Thought
Dave Blanchard

Conditions Stabilize with the Meter Stuck on “Lousy”

Conditions for shippers right now, the consensus goes, are pretty lousy, but for those of you who will grasp at any straw, it’s perhaps the first wee sign of hope that things haven’t gotten significantly lousier over the past month. At least, not according to the monthly Shippers Conditions Index, monitored by FTR Associates.

The index (which in an acronym-fixated world has been nicknamed the SCI) sits at -7.5, which admittedly is a worse score than the -6.9 reported a month earlier, but which FTR nonetheless characterizes as “basically unchanged.” A score below 0.0 indicates a less-than-ideal environment for shippers, and needless to say, things have been less-than-ideal for quite some time now. Once that reading gets to -10, it becomes “uh-oh!” time, signaling that conditions are reaching critical levels, both for available capacity and expected carrier rates.

“The sluggish economy and freight environment that has persisted for nearly two years now has created an environment in which shippers have been able to secure low rate increases despite fleets operating with fairly small amounts of spare capacity,” notes Jonathan Starks, FTR’s director of transportation analysis. “The introduction of more restrictive Hours-of-Service regulations for drivers on July 1 means that the amount of excess capacity in the system has shrunk even more. As long as freight levels continue to inch upward, truck rates are likely to begin a more significant pattern of increases. If nothing else, fleets will be looking to cover their increased operating costs for drivers, in addition to taking advantage of the reduction in spare capacity that generally drives upward movement in truck rates.”

According to Starks, shippers should expect to see an acceleration in rates for the second half of the year, coinciding with the new Hours-of-Service rules taking capacity out of trucking (basically, shortening the work week for drivers by 12 hours per week). These negative factors will result in a continuing decline in the SCI. Whether or not the index makes it to the dreaded -10.0 score, though, remains to be seen.

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