A measure of business conditions for shippers remained deep in negative territory in March, meaning the climate favored trucking companies, according to a newly released report.
FTR’s Shippers Conditions Index for March was basically unchanged from February at a reading of -8.7, reflecting extremely tight capacity available to haul goods.
The freight transportation forecasting firm expects the tight environment for shippers to moderate slightly in the coming months unless freight growth picks up as a result of a strengthening economy. For shippers, it warns that any additional improvement in freight tonnage, capacity could hit a critical stage, forcing shippers to incur added purchased transportation costs.
FTR's Shippers Conditions Index, 2014 vs. 2013. Credit: FTR
“Shippers learned that it doesn’t take much for a market that is operating with slim excess capacity to jump into the driver’s seat for rate increases,” said Jonathan Starks, FTR’s director of transportation analysis. “The strong spot market rate increases seen during January, February, and March highlighted how quickly the environment can change on them.”
He noted just one year ago, several industry sources were showing that general rate increases were actually below year-ago levels, and shippers were getting rate reductions.
“A fairly static economy allowed that to take place, but the introduction of new hours-of-service rules for drivers back in July 2013 changed that,” said Starks. “Add in the potential for further economic acceleration in 2014 and we find it very unlikely that shippers will be able to get the rate reductions that they achieved last year.”
FTR expects to see general rate increases of 4-5% for the year for truckload with national rate figures hitting 6% or higher versus last year during the middle of 2014.
The Shippers Conditions Index is a compilation of factors affecting the shippers transport environment. Any reading below zero indicates a less-than-ideal environment for shippers. Readings below negative 10 signal that conditions for shippers are approaching critical levels, based on available capacity and expected rates.