FTR Associates data points to an improving trucking sector

Based on the most recent reading of FTR Associates’ Trucking Conditions Index (TCI), it appears that the trucking sector is showing some signs of solid growth.

The TCI, which reflects tightening conditions for hauling capacity and is comprised of various metrics, including capacity, fuel, bankruptcies, cost of capital, and freight, was at 9.1 in April, the most recent month for which data is available.

This 9.1 reading is a positive indicator for the market. According to FTR, a TCI reading above zero represents an adequate trucking environment, with readings above ten indicating that volumes, prices, and margin are in a good range for carriers.

And it is above the previous three months, which saw the TCI register at 6.1, 5.9, and 7.0 in March, February, and January, respectively.

FTR Senior Consultant Larry Gross said in a statement that while volume growth is modest, but with the industry not adding capacity, modest freight growth is leading to firm rates.

“Although there is a fair amount of volatility in the TCI from month-to-month, and we would not preclude some near-term decline, we expect an overall gradual improvement in trucking conditions through the balance of 2012 and into 2013,” said Gross. “This is based on our expectation for higher rates, supported by continued modest growth in freight volume and tightening driver supply due to the implementation of new government regulations.  Lower prices for diesel are another factor currently working in the truckers’ favor.”

As LM has reported, there are multiple factors at play which are positive for carriers, including fairly tight capacity, a limited driver pool, and regulations like CSA and HOS (set to kick in next year) working in tandem to create an environment in which many shippers are chasing the same carriers for freight.

In a previous interview, Gross said that even with mild economic growth, overall conditions are likely to be tempered for shippers, adding that if the recent spate of good economic news translates into more robust economic growth, capacity would tighten significantly and greater upward pressure on freight rates will come as a result.

The firm also said that the rebounding U.S. economy is expected to produce at least a 3.9 percent gain in truck freight that would top overall GDP performance.