FTR Shippers’ Condition Index show modest uptick

Business conditions for shippers in December showed improvement from November but still represent a “somewhat adverse” environment, according to the most recent edition of the Shippers Condition Index (SCI) from freight transportation forecasting firm FTR Associates.

The SCI edged up roughly 1-to-1.5 points in December, the most recent month for which data is available, to -4.6, said FTR. November’s SCI was 6.1, and May’s -11.4 was the worst SCI reading of this current economic cycle. A reading above 0 suggests a favorable shipping environment, and FTR describes the SCI as an indicator that sums up all market influences that affect shippers.

FTR officials said that this sequential improvement from November to December highlights an “easing in demand for transport capacity.”

And the firm added that tight equilibrium between demand and transport capacity will keep the SCI stable in modestly negative territory until 2013 at which point it could worsen as a result of a regulatory drag on capacity from the Federal Motor Carriers Safety Administration’s final Hours-of-Service rule, which is expected to take effect by mid-2013.

“FTR’s base case anticipates that conditions will continue to be difficult for the nation’s shippers, even though economic growth is still anticipated to be lackluster,” said FTR Senior Consultant Larry Gross in a statement. “If the recent spate of good economic news translates into more robust economic growth, capacity would tighten significantly and greater upward pressure on freight rates will result.”

In a recent interview with LM, Gross said that the current SCI readings represent a “more of the same” type of theme in that tight capacity and firm rates are expected to remain intact. Another hindrance to adding capacity, said Gross, is an ongoing challenge for carriers to find available drivers.

“With HOS, it is much less likely in this extended timeframe and the more moderate posture of the final rule that there will be some sort of court delay in this timetable [should safety groups or trucking groups challenge the FMCSA’s HOS ruling in court],” he said. “The question is whether the Feds have successfully threaded the needle and put out a rule that sufficiently displeases each party to the extent that it can get through the court. But a court may say ‘these guys listened and made an attempt to put good science behind it’ and that the rule is imperfect but not imperfect enough to the point where it should intervene. It is very likely that could be the end result and may be the end of this [HOS] saga.”