Chain of Thought

Things Could Go Wrong So Quickly that We Might Be Living in the Good Ol’ Days Right Now

So when exactly is the long-hoped-for recovery for shippers going to finally arrive? Going by the latest analysis of shipping conditions from transportation consulting firm FTR Associates, not anytime soon.

FTR’s Shippers Conditions Index for December 2012 had a reading of -4.9, which is a slight improvement from the previous month’s negative reading of -5.3, but only in the sense that banging your head against a wooden door doesn’t hurt quite as much as banging it on a steel door. According to FTR, that -4.9 score reflects tightening capacity within the freight marketplace, and it’s only going to get significantly worse by mid-year.

How much worse? FTR projects the score could reach -10.0 by the summer. When you consider that any negative score already means a tough environment for shippers, a score that drops to -10.0 indicates conditions will be near critical levels, based on available capacity and expected rates. So if you think things are rough now, by mid-summer, you could be looking back to February 2013 as “the good ol’ days.”

“Despite recent problems emanating from issues at the federal level, most indicators point to continued modest growth in both the economy and freight markets, says Jonathan Starks, FTR’s director of transportation analysis. The biggest transport issue that arose at the end of 2012, he says, was the reduction in inventories.

Meanwhile, according to Starks, “Shipping managers will be quickly turning their attention to the looming Hours-of-Service (HOS) changes that are scheduled for July 1, 2013. Those rules will have a varied impact on shippers depending on how their operations are currently set up. Many will take a substantial hit to the productivity of their trucking operations, some as great as a 10% hit. The need for additional equipment and drivers will create additional pressure for truck rates to move higher later in the year.”

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