Chain of Thought
David McNewGetty Images

David McNew/Getty Images

Not Much of a Horizon on the Horizon

The Shippers Conditions Index (SCI), a monthly score tabulated by transportation forecasting firm FTR, improved somewhat in August, increasing 1.3 points to a score of -6.5 (compared to -7.8 in July). The fact that the SCI is still well below zero—a threshold that indicates a less-than-ideal environment for shippers—points to a sustained low level reflective of persistent capacity shortages and rising rates.

Based on FTR’s analysis, costs to ship goods in the current freight environment most likely will remain elevated. Contract pricing for truck are up 4%, with rail rates similarly on the rise. FTR expects the SCI to remain in the current negative range for the foreseeable future, as long as freight growth continues.

FTR-chart-August-2014

“Shippers will continue to be squeezed as we move into the holiday season,” says Eric Starks, president of FTR. “The capacity situation for trucking is still tight and is not expected to ease back any time soon. Also, the railroads continue to have service issues, and their ability to pick up a significant amount of extra freight is constrained at the moment. We don’t anticipate any increase in service levels from the railroads until well after the holidays are over.”

The lone bright spot, according to Starks, is that fuel surcharges passed on to shippers are droping rapidly as fuel process drop. “This is a welcome sight for shippers,” he observes, “as long as it does not telegraph a slowdown in economic activity that could hurt a shipper’s core business.”

 

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