Conditions for shippers improving, FTR says

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Shippers

Breaking a long-term decline, FTR Associates on Tuesday, June 14, reported a significant reversal in its Shippers’ Condition Index, which improved to a reading of -5.4 from -11.4 the prior month. FTR says the healthier environment for shippers is due to a slowdown in freight demand growth thanks to the current lull in economic activity, as well as further delays announced in the implementation of new federal trucking regulations.

The SCI sums up all market influences that affect shippers; a reading above zero suggests a favorable shipping environment, while a reading below zero is unfavorable. Larry Gross, FTR senior consultant, says the current “soft spot” in the recovery is providing some breathing room for shippers as the growth in freight has slowed.

“At the same time, we have moved back our forecasts for regulation-based tightening of the supply of trucks, as the federal government has delayed the implementation of new driver regulations,” Gross says. “This is a temporary respite in our view.”

Gross sees the SCI starting to deteriorate once again as the economy begins to reaccelerate later this year. As the new trucking regulations begin to kick in, shipping costs will increase through 2012, with transport costs such as fuel, equipment and labor rising faster than the general rate of inflation, he forecasts.