FTR on Monday, Feb. 28, announced that its Trucking Conditions Index rose to 9.1 in January from a December reading of 7.1. The Trucking Conditions Index is a compilation of factors affecting trucking companies and has been rising steadily since October 2010; any reading above zero indicates a healthy trucking environment. FTR forecasts that continued economic growth combined with the impact of new safety regulations will produce sufficient freight to stress capacity, sustaining an upward trend for the TCI until mid-2012.
“Good freight demand and tightening capacity are allowing truckers to push freight rates higher,” says Eric Starks, president of FTR. “We expect to see significant movement as we leave the winter freight lull behind in March. Our expectations for improving freight conditions are increasing, but at the same time, we are moderating our near-term assessment for regulatory drag, as we now believe that more of this will be concentrated late in the year and into 2012.”
Starks also warned that challenges lie ahead, including significant cost increases on the horizon, including higher equipment and labor costs. “These increases would negatively affect the Trucking Conditions Index, but we feel that they will be outpaced by the improving rate environment,” he says. “A major wild card is fuel prices.” Starks says the recent sharp run-up in fuel costs due to Mideast unrest – not yet reflected in the TCI –will put a great deal of pressure on marginal carriers if sustained.
“The time lag between the increase in the cost of diesel and their ability to recover the cash via fuel surcharges will put stress on already-shaky balance sheets,” Starks says. “The net result might be a further tightening in capacity as marginal carriers succumb, provided that the oil price run-up is not so severe as to adversely affect the recovery itself.”