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In the Spirit of Optimism, Let’s Just Say Shipping Conditions Are Less than Optimal

In the Spirit of Optimism, Let’s Just Say Shipping Conditions Are Less than Optimal

Spring is in the air, most of the snow has melted, the birds are chirping, the new baseball season is underway… should we really let ourselves get overly concerned that the Shippers Conditions Index has dropped to its lowest point in a year? The SCI, a compilation of factors affecting the shippers transport environment tracked by transportation analyst firm FTR, had a reading of -8.8 for the month of February 2014, the lowest since the index dropped to -9.4 in February 2013. Just a month ago, the SCI was at -6.3, so the index plunged 2.5 points since January (see SCI chart below).

With the SCI, any reading below zero indicates a less-than-ideal environment for shippers. Readings below 10 signal that conditions for shippers are approaching critical levels, based on available capacity and expected rates.

According to Jonathan Starks, FTR’s director of transportation analysis, lousy weather had a lot to do with deterioration in the SCI. Shippers experienced an earlier-than-normal tightening of capacity that was a result of the debilitating effects of winter storms. “Most of the components in the SCI are only slightly negative (freight, costs, and fuel),” Starks notes. “The main drag comes from the very tight capacity situation that was highlighted this winter.”

FTR’s analysis points to some improvement later in the year, though 2014 looks to be a very volatile year for shippers. “This is a year to closely monitor signs for an economic uptick because it could have quick impacts on the transport sector,” Starks says. “If the economy stays stuck in slow-growth mode and the weather finally behaves, we can expect the extremely tight capacity to normalize by mid-summer. If, however, we can finally get some additional economic activity, especially in the vital manufacturing sector, the tight truck environment will persist and could significantly worsen. Now is a time for careful planning for the quickly approaching fall shipping season.”

 

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