July 9, 2012
Slowing economy taking toll on demand for trucking, says FTR Associates.
A monthly index of trucking conditions fell significantly in May compared to April's figures, an indication that shippers are benefiting from the carriers' inability to raise their rates amid a sluggish economic climate.
The FTR Trucking Conditions Index, published by the Nashville, Ind.-based consulting company FTR Associates, fell to a reading of 5.1 in May from 9.1 in April, dropping to the lowest level in six months. A reading above zero indicates a positive operating environment for truckers, while a reading above 10 signals what the consultancy calls a "solidly favorable range" for truck volumes, pricing, and margins.
FTR said the magnitude of the decline reflects weak pricing trends for both truckload and less-than-truckload carriers, as well as a more abundant supply of drivers than might have been expected at this point in time.
"The weakening recovery is making itself felt in lackluster growth in truck freight demand," said Larry Gross, a senior consultant at FTR.
Gross said the problem is almost entirely demand-related, noting that carriers remain operationally disciplined in terms of shedding unprofitable freight and not adding capacity to their existing fleets. Still, weak demand is making it hard for carriers to raise rates, he added.
Gross said FTR expects industry conditions—and the index—to slowly improve through the second half of the year.