FTR’s Trucking Conditions Index (TCI) rose to 9.1 in January from a December reading of 7.1. The TCI is a compilation of factors affecting trucking companies, and has been rising since Oct. 2010. FTR forecasts predict continued economic growth, and the impact of new safety regulations will produce freight and sustain an upward trend for the TCI until mid-2012.
“Good freight demand and tightening capacity are allowing truckers to push freight rates higher. We expect to see significant movement as we leave the winter freight lull behind in March,” says Eric Starks, FTR president. “Our expectations for improving freight conditions are increasing, but at the same time we are moderating our near-term assessment for regulatory drag, as we now believe that more of this will be concentrated late in the year and into 2012.”
In spite of the success, Starks says challenges still lie ahead. “Significant cost increases are on the horizon, including higher equipment and labor costs. These increases would negatively affect the TCI, but we feel that they will be outpaced by the improving rate environment.”
“A major wild card is fuel prices. The recent sharp run-up in fuel costs due to Mideast unrest (not yet reflected in the TCI), if sustained, will put a great deal of pressure on marginal carriers,” Starks adds. “The time lag between the increase in the cost of diesel and their ability to recover the cash via fuel surcharges will put stress on already-shaky balance sheets. The net result might be a further tightening in capacity as marginal carriers succumb, provided that the oil price run-up is not so severe as to adversely affect the recovery itself.”