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Sometimes Bad News Can Also Be Good News

Sept. 7, 2015
While a soft economy is spooking some markets, shippers are reaping the benefits of low fuel prices.

A slowdown in GDP growth doesn’t sound like good news for those hoping for some improvement—any improvement—to the sluggish economy, but it does offer a ray of sunlight to shippers, according to the latest Shippers Conditions Index, a monthly analysis of the freight transportation environment compiled by FTR, a transportation forecasting firm. The score for June came in at -2.0, which again doesn’t sound very impressive but in fact continues a recent trend of the index inching closer to positive, or at least breakeven, territory.

Soft market conditions have slowed, for the time being, rate increases that negatively impact shipper costs. As FTR’s analysis points out, with freight growth slowing and fuel prices staying soft, it’s possible that the index could move into positive territory again later this year, a position it held briefly back in January 2015.

“Line-haul rates are but one aspect of a shipper’s overall logistics budget,” points out Jonathan Starks, director of transportation analysis at FTR. “However, it is one of the more variable elements and that makes it a very visible piece. This is easily seen in the wide swing in truckload spot prices over the last year. Data from loadboard shows that rates were up as much as 20% during 2014, and now they are down nearly 15% in the middle of 2015. Big drops in fuel prices account for about half of the decline, and continued price drops at the pump indicate that it will persist for some time.”

Global pressures have risen of late and, as Starks explains, these pressures pose a detriment to demand for both shippers and transportation companies. Export activity, for instance, has weakened considerably, and “Chinese issues have rattled stock markets both at home and around the globe. Concerns for a recession certainly increase any time you have a lot of volatility occurring in markets. Right now is no exception, although the U.S. is a more isolated arena and should be able to withstand the current environment without major disruption to our domestic economy.”

The Shippers Conditions Index is a compilation of factors affecting the shippers transport environment. 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.

{Good news/bad news image provided by Thinkstock]

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