A monthly index of economic conditions in the trucking industry soared to levels in January that it has reached only once in the past nine years, reflecting a healthy environment for truckers and higher freight rates for shippers.
The Trucking Conditions Index, published by Bloomington, Ind.-based consulting company FTR Associates, hit a reading of 10.6 in January, up 2.2 points from December's results. Any reading above 10 indicates that truckers will experience strong volumes and margins and be in firm control of prices. Conversely, shippers should brace themselves for significantly higher prices, if the index is accurate.
The last time the index hit such elevated levels was in March 2011, when the industry still had some momentum coming out of a fairly strong recovery in 2010. The momentum didn't last, however, as freight demand in 2011 proved disappointing.
Jonathan Starks, FTR's director of transportation analysis, called the 2011 jump a "one-time event." By contrast, the current trend has staying power, with the index expected to remain in favorable territory for truckers into 2014, he said.
Because the index is forward-looking, the January readings were influenced by the fact that the Federal Motor Carrier Safety Administration (FMCSA) will begin enforcing its rules governing a truck driver's hours of service on July 1, Starks said.
The rules' enforcement will tighten capacity to levels not seen since 2004, Starks said. "Eventually, carriers will have the ability to raise rates, but their costs, especially in driver pay, will increase as well," he said.
If upheld in court, the rules are expected to shave anywhere from 3 to 7 percent off truck capacity at a time when qualified drivers are not easy to come by, truckers are replacing but not adding rigs to their fleets, and demand may finally be picking up in a sustainable manner.
Shippers and truckers have sued the FMCSA in an effort to block the rules, arguing the current regulations effectively balance safety and commercial needs and that portions of the new rules will disrupt established supply chains and actually jeopardize safety. A federal appeals court in Washington, D.C., will hear oral arguments tomorrow in the dispute.
Separately, FMCSA has denied a request by the American Trucking Associations to extend the enforcement deadline for an additional three months.