Volatile market conditions have swept into the freight sector this Spring as the transportation sector analyst firm FTR today said its Trucking Conditions Index (TCI) for March was negative for the first time since May 2020.
The Bloomington, Indiana, firm said its TCI for the month plunged to a reading of -7.38 from February’s positive 12.06 mark. The index tracks changes in five conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel price, and financing. Combined into a single score, the number represents good, optimistic conditions when positive and bad, pessimistic conditions when negative.
According to the firm, the main reason for the sector’s slump was the surge of diesel fuel prices in March but another contributing factor was a softening of freight rates. The swift change shows that while the outlook for trucking conditions generally is for “modestly positive” conditions, uncertainty is rising in key areas like fuel costs, capacity utilization, and rates.
As recently as February, FTR’s model indicated that market conditions for trucking carriers would remain strong through 2022, after the TCI climbed to a seven-month peak for December thanks to falling diesel prices and rising freight volumes.
FTR now forecasts that the trucking sector faces a “treacherous” future, but said that macro-economic tendencies could soften the blow. “Given the unprecedented surge in diesel prices during early March, a negative reading for the Trucking Conditions Index was hardly surprising. Fuel costs apparently will represent a big negative factor for May as well,” Avery Vise, FTR’s vice president of trucking, said in a release. “The road ahead looks treacherous, but it is not necessarily bad for carriers. A stronger supply of drivers is enabling a shift of activity back to the contract environment from spot, but overall freight volume so far has remained strong. Consumer spending is still robust even when adjusted for inflation, and industrial activity is growing.”
In the meantime, near-term conditions could be tricky, thanks to “external shocks” like pandemic-related lockdowns in China, FTR said. Those impacts could be particularly tough on small carriers that are seeing weaker spot rates and soaring fuel costs. In response, independent drivers may flood back to the security of working directly for larger carriers. And that move could accelerate a market normalization, pending the availability of enough trucks and trailers to keep them busy.