The FTR Trucking Conditions Index for June jumped up 56% from May to a reading of 7.66, hitting the highest level of 2015 so far.
Despite slowed growth in freight during the second quarter, rates continued to increase and margins are still good. FTR believes regulatory conditions and continuing economic recovery should fuel an accelerating index during 2016.
Despite slow freight growth so far this year, FTR indicates that it is still on track for the 6th straight year of annual gains. Low fuel costs continue to be a positive for the freight industry, but labor costs have increased, which is maintaining pressure on rising rates. If fuel prices do finally jump during 2016 as capacity is tightening, FTR projects that it could cause a significant acceleration in rates.
“May was the lowest level in three years, but June was the best month so far in 2015,” said Jonathan Starks, FTR’s director of transportation analysis. “Continued declines in fuel prices during July and August should help to keep the index elevated as the industry prepares for the fall shipping season.”
The Index’s typical fall peak may not be as strong in 2015, but the economy is steadily improving and contract rates are growing compared with last year. The spot market has slowed and the most recent Market Demand Index from Truckstop.com shows that it is down 50% from 2014.
“Spot rates are also down, but not nearly as dramatically, and half of the decline stems solely from lower fuel prices,” said Starks. “The truck market is quite stable at the moment and seems likely to maintain that pace until we get into 2016.”