Capacity tightness a major driver for declining FTR Shipper Conditions Index
Ongoing freight transportation capacity tightness continued to drive down the most recent reading of the Shipper Conditions Index (SCI), from freight transportation consultancy FTR.
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Ongoing freight transportation capacity tightness continued to drive down the most recent reading of the Shipper Conditions Index (SCI), which was released late last week by freight transportation consultancy FTR.
FTR describes the SCI as an indicator that sums up all market influences that affect the transport environment for shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”
For September, the most recent month for which data is available, the SCI came in at -8.2, down from August’s -6.7. Citing data from Truckstop.com, FTR pointed to underlying tightness in capacity that is steadily raising rates and some continued uptick from hurricane-impacted capacity utilization.
And it added that 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. But, if the economy remains strong, FTR said there is a downside risk that capacity and rates will be even more negatively impacted with a falling SCI measure.
“Shipper pressure has been mounting since the middle of the summer,” said FTR Chairman and CEO Eric Starks in a statement. “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.”
These comments and data match up well with previous sentiment from FTR, stating that it expects the SCI to see more downward activity over the rest of 2017 and into 2018, with spot markets continuing to head up and contract prices seeing smaller but notable increases.