Summer vacations are over, the kids are back in school, and after a brief pickup in conditions for shippers, things are about to get uncomfortable again, based on the latest Shippers Conditions Index analysis conducted by transportation forecasting firm FTR. Capacity has been tight for several years now, so the modest improvement shippers saw in June—with the index moving from -7.5 to -6.5—still saw conditions deeply in the negative zone. Any reading below zero indicates a less-than-ideal environment for shippers, so it’s safe to say that “less-than-ideal” has become the New Normal.
This modest improvement may be short-lived, though, since FTR is forecasting that the index will fall back again in July and remain around -7.5—or lower—for the rest of the year.
“While the June SCI moved in a positive way for shippers, it still remains quite negative and highlights that they are operating in a capacity-constrained environment,” explains Jonathan Starks, FTR’s director of transportation analysis. “To date in this recovery, aside from the weather-plagued winter of 2014, freight growth has been both fairly stable and relatively modest. This has allowed fleets to operate with very little excess capacity and keep contract rates relatively low as they focused on baseload contracts. This has moved much of the demand fluctuations to the spot market, in which price swings can be much more dramatic.”
According to Starks, spot rates started to show an upward movement at the end of summer, which could be an early indication of potential capacity issues as the industry shifts into the fall freight shipping season. “Contract rates will be moving up,” he notes, “but it will be wise to watch spot rate activity to see how demand and capacity are matching up.”