FTR’s Trucking Conditions Index improved in July reflecting improved market prospects as a result of moderate economic growth and a regulatory environment that is tightening capacity.
The July TCI jumped to a reading of 5.99 for the month, a significant gain over June’s 2.92 and May’s abysmal 1.69 reading. TCI readings for the rest of the year and into 2017 should remain near the current level, according to FTR.
FTR expects increased regulatory drag over the next 18 months which should increase pricing and margins for fleets that have capacity.
“The freight market is doing slightly better than just treading water, but there is still a disconnect between activity in the spot and contract markets,” said Jonathan Starks, chief operating officer at FTR. “This is a result of the slow growth environment that we are in right now.”
Contract carriers are being used the most by shippers and there hasn’t been enough extra freight to spill over into the spot market, according to Starks. This caused spot rates to fall and helped shippers to put pressure on contract carriers.
“I believe that those conditions will soon be turning, especially for van freight,” said Starks. “One note of caution is in the flatbed segment. The big reductions in oilfield activity has continued to put too much carrier capacity back into the spot market, and pricing is still weak for this segment. Until oil prices move higher or housing and business investment rally, the long-haul flatbed market is going to continue to struggle for volumes and rates.”