Trucking Conditions Index declines

The Trucking Conditions Index (TCI) unexpected dropped in January, but still remained above 5.0 for the third straight month. The index fell 0.9 points to 6.1, well below our expected reading of 10.4. Most of this was due to the historical changes to the freight and utilization data. The biggest negative contribution in January came from fuel. Fuel prices are currently moving higher, and our diesel price outlook moved higher this month. The index is 3 points below its level one year prior. This is the first significant year-over-year decline since before at least 2010.

The index has been above 5 for 13 of the last 15 months and should see some modest acceleration in early 2012. Solid industry conditions (growth, capacity, pricing) have kept this index well in positive, but still below the heights associated with the strong growth spurt in 2010 that improved the TCI into early 2011.

NOTE: We have updated our historical freight data to better reflect the wide swings in economic activity that occurred during the Great Recession and the ensuing recovery. However, please note that the historical data for the Trucking Conditions Index is not revised. To find out what the freight changes were and how they affect our outlook for the industry click here. (http://www.truckgauge.com/2012/02/22/freight-calibration-what-the-data-revealed-and-what-it-means-for-trucking/)

Outlook
After bouncing around in mildly positive territory in 2011, the FTR Trucking Conditions Index will begin a slow climb to strongly positive territory in 2012. Volume and profits will be sufficient for investment for growth by year’s end.

The above noted changes to the freight data, combined with our higher fuel price outlook, modestly lower the index in early 2012. Conditions will start to improve during the latter half of 2012 and into 2013 as we approach the HOS introduction slated for July of that year. As we get into 2013 we look for the TCI index to move above the double-digit mark and likely stay above that until well into 2014. We are not anticipating a huge surge in the index since the rules have a long-lead time and will not be occurring during a freight surge – one of the reasons why the 2004 impact was greater.

Analysis
The rough balance between increased recruiting and the capacity pressures from tonnage growth and regulatory drag will keep this index in good, positive territory in 2012. Stronger conditions await either an acceleration in economic growth or the major HOS implementation in 2013.

While the index is looking to be a positive figure, it is well below the highs seen in early 2011 or during the last upturn in 2004. The TCI should hit double-digit figures as we get into 2013 and approach the implementation date of HOS (if it actually occurs).

In 2004 we had a combination of both strong industry growth and big regulatory drag occurring during the same year. The further delayed (and likely litigated) HOS rules this time around mean that the impact will be more muted. The industry will have recovered from much of the cyclical effects of the strong early growth during this recovery.

ABOUT THE INDEX:
FTR’s Trucking Conditions Index (TCI) measures five specific categories that effect the freight markets and truck carriers. Those categories are: freight volumes, capacity utilization, cost of capital, trucker bankruptcies/failures, & fuel. The index is correlated so that a mark near zero is consistent with a trend market, conditions are neither good nor bad. A positive number means a good market for truckers and, likewise, a negative number means a bad environment for truckers.