Trucking Conditions Index still under 5.0

The Trucking Conditions Index (TCI) is at or near an inflection point. The index dropped just 0.1 points to 4.4. It remains in the moderately positive range but is at its lowest level since October of last year when industry conditions were weak following the late summer panic. The outlook improved from last month but industry conditions are likely to remain muted until we get to the end of the year. 2013 should be stronger if HOS regulations are finally realized.

Outlook
After staying mildly positive in 2011, the FTR Trucking Conditions Index ticked up in early 2012 but has fallen since then. The index value has fallen by more than half since April. We expect weakness to persist as we move into the fall, but to slowly build strength as we get towards the end of the year. 2013 should see robust growth from the HOS implementation mid-year. We expect to get close to double-digits by early 2013.

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. Look for the index to peak in late 2013 (well above 10.0) with a sustained high level through most of 2014 – if economic conditions hold up, of course.

Analysis
The FTR Trucking Conditions Index is at or near an inflection point. It fell only modestly in July to 4.4. The downward slide reflects stable capacity, relatively slower freight growth, and little or no current rate increase. The upward forecast reflects tightening capacity from regulations, which will eventually lead to higher rates.

Recent History
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 index has been above 5.0 for 17 of the last 20 months but has now weakened below that and we don’t expect to see acceleration until we get into late 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. Pricing has weakened of late, but the capacity situation remains tight and modest freight growth is still occurring.

In 2004 we had a combination of both strong industry growth and big regulatory drag occurring during the same year. The delayed 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.