FTR Associates’ Trucking Conditions Index for February, published in the April issue of Trucking Update, fell to a reading of 7.54, down slightly from 8.82 in the previous month, but continuing to reflect a positive environment for trucking fleets in the U.S. The “good news” for trucking fleets spells bad news for shippers seeking carriers to move their goods, as the index reflects “unprecedented” capacity constraints, FTR said.
When adjusted for severe weather, the TCI reading would be pushed above a reading of 10, making it the tightest truck market on record, according to the analyst firm. Severe winter weather was blamed in part for disruptions in manufacturing, stranded drivers, higher driver wages and increased truck maintenance costs, boosting spot rates in heavily affected areas.
FTR expects the index to remain in this range throughout 2014, driven by truck freight demand coupled with regulatory drag hindering available capacity. Noel Perry, FTR managing director and senior consultant, and Larry Gross, FTR senior consultant, said in a JOC article earlier this year that demand for trucking services is expected to grow in the mid-2-percent range in 2014. They noted that the biggest constraint on the industry will be the tight driver supply, aggravated by the revised hours of service regulations that kicked in last July.
“The most recent weekly spot market data shows that the spring thaw has come to truck demand with spot market capacity up and load activity down slightly — a plateau versus the last couple of months when both demand and pricing spiked while capacity was severely constrained,” said Jonathan Starks, FTR’s director of transportation analysis, in a written statement.
“Both carriers and shippers have to be on the lookout for a potential tipping point when freight demand is able to keep the current high level of truck use well into the summer months,” Starks continued. “Such an environment would necessitate shippers bidding up rates to maintain secure capacity during the fall shipping season.”
Starks said FTR currently sees enough moderation in truck demand to get through this year without a crisis, but he also noted that it would only take a “relatively modest and short uptick” in the industrial sector for capacity to further tighten.
Economic activity in the manufacturing sector, which is an important driver of trucking activity, expanded in March for the 10th consecutive month, according to U.S. supply executives in the latest Manufacturing ISM Report on Business, released today by the Institute for Supply Management. The March PMI registered 53.7 percent, an increase of 0.5 percentage point from February’s reading of 53.2 percent, signaling building economic momentum.