FTR Shippers Conditions Index remains in a holding pattern

Following a slight improvement in its previous edition, the most recent edition of the Shippers Conditions Index (SCI) from freight transportation forecasting firmFTRshows that current market conditions for shippers appear to be in a holding pattern.

FTR describes the SCI as an indicator that sums up all market influences that affect shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”

For May, which is the most recent month for which data is available, the SCI is -7.5, following April’s -7.5. FTR said this reading represents a still-tight capacity environment, as utilization rates hover between 98 percent and 99 percent. And the firm added that increases on labor costs and purchased transportation are expected to push shippers’ costs up through year-end, while truckload spot market rates continue to rise, which was expected, coupled with increases in contract prices.

“Although shippers are not struggling to find capacity as they were during the storms earlier in the year, capacity remains tight for both truck and rail,” said FTR President Eric Starks in a statement. “The driver shortage continues to limit trucking, while service levels on the rails have been an issue. Shippers are increasingly pressured to maximize capacity by collaborating with carriers to increase productivity.”

Starks said in a recent interview with LM that the current situation is interesting in that things continue to be strong in a sense that capacity is relatively tight but not critical in any way, while rate pressure on the truckload side remains intact.

But he noted that there is a caveat with some of the issues shippers were dealing with earlier in the year, notably the harsh winter weather, have abated.

“The winter created a huge capacity crunch as shippers were scrambling to find equipment,” he explained. “That is over now, buy the driver shortage situation remains an issue and is a major problem that carriers really cannot stress enough. We are kind of at an odd spot right now, because it really won’t take much of an economic pick up to push us back to that critical spot again where we were last winter. If we start seeing the economy heating up at all, it could create some problems as things are already on the edge.”