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Wednesday, May 29, 2024

FTR Forecasts a Slowdown

Trucking Conditions Index continued to soften in February due to a weakening of the freight environment in early 2016. The current reading at 8.27 reflects FTR’s forecast for a slowdown in truck loadings from an average of 4 percent thus far in the recovery to 2 percent for full year 2016. There are still positive indicators for trucking including high capacity utilization and positive rate assumptions. The TCI is expected to begin a steady rise heading into 2017 due to expected regulatory capacity constraints and will continue to be positive into 2018 save for the risk of recession or the possibility of temporary spikes in fuel prices reacting to weak United States production.

“The market has certainly softened in 2016, yet there are still enough positive indicators to keep the freight markets afloat despite the weakness,” said Jonathan Starks, FTR COO. “Freight loads are looking to slow this year, but 2 percent growth is still a reasonable environment for truck operations. What it doesn’t do is create pressure on capacity, which is what would be needed to improve the rate environment.

“A key focus will be whether the manufacturing sector can stabilize and begin to grow again. I believe it will, but it may still be a quarter or two before fleets start to benefit from that activity. The rate environment has deteriorated, but unless the market sinks further, we should expect to see contract rates begin improving in the second half of the year. Spot rates have been on a steady decline but have recently turned back up and should show year-over-year increases sometime this summer.”

Fuel prices have the potential to upset the market if they take a sharp turn up, said Starks.