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Monday, September 26, 2022

Shippers Conditions Index Fell Further in September Thanks To Tight Capacity

 

FTR’s Shippers Conditions Index fell further in September to a reading of -8.2 from the -6.7 in August. Data from Truckstop.com shows underlying tightness in capacity that is steadily raising rates and some continued uptick from hurricane-impacted capacity utilization. The pressure from the hurricane demand will abate shortly, which will somewhat improve the environment for shippers improving the SCI reading although it will stay in negative territory. However, if the economy remains strong, there is a downside risk that capacity and rates will be even more negatively impacted with a falling SCI measure.

Eric Starks, Chairman and CEO at FTR, commented, “Shipper pressure has been mounting since the middle of the summer. The lower SCI number validates those pressures and suggests that further rate increases are on their way. We have already seen the increase in spot rates, and are recently seeing contract rates being pushed higher. This is coming from increased freight demand, while real capacity continues to tighten. Another data point that validates the tight environment is showing up in demand for new trucks as orders for equipment has surged over the last two months as fleets look to expand their fleets. Given the current market conditions we would expect to see the SCI move lower once the October data is released suggesting additional pressure on shippers.”

The Shippers Conditions Index tracks the changes representing four major conditions in the U.S. full-load freight market. These conditions are: freight demand, freight rates, fleet capacity, and fuel price. The individual metrics are combined into a single index that tracks the market conditions that influence the shippers’ freight transport environment. A positive score represents good, optimistic conditions. A negative score represents bad, pessimistic conditions. The index tells you the industry’s health at a glance.

In life, running a fever is an indication of a health problem. It may not tell you exactly what’s wrong, but it alerts you to look deeper. Similarly, a reading well below zero on the FTR Trucking Conditions Index warns you of a problem….and readings high above zero spell opportunity. Readings near zero are consistent with a neutral operating environment. Double digit readings (both up or down) are warning signs for significant operating changes.