Trucking Conditions Index flat

The Trucking Conditions Index (TCI) stagnated in February, but managed to stay above 5.0 for the fourth straight month. The index fell just 0.2 points to 5.8, which was below our expected reading of 7.4. Downward revisions to load volumes for the last several months, combined with higher expectations for fuel prices, kept the index from moving up. Fuel prices are still moving higher, and our diesel price outlook moved higher this month. Recent declines in the price of crude oil give us some breathing room as we get into the typical freight uptick in March. The index is 4.1 points below its level one year prior.

The index has been above 5 for 14 of the last 16 months and we continue to expect some modest acceleration as we move further into 2012. Solid industry conditions (growth, capacity, pricing) have kept this index well in the positive, but still below the heights associated with the strong growth spurt in 2010 that improved the TCI into early 2011.

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 index is expected to remain in modestly positive territory for most of 2012, ranging between 5 and 10. 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 TCI index growth was greater.

Analysis
The truckers’ ability to sustain price despite soft volume growth has kept the trucking conditions index in mildly positive territory. Now that volumes should begin increasing again, this index should increase in 2012. By year’s end, it should be high enough to encourage some investment for growth.

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.