A more favorable climate for truckload pricing is about to take hold, and it could drive freight rates significantly higher by year's end, according to an analysis of a monthly index published by consultancy FTR.
FTR's most recent "Trucking Conditions Index," which covered November, showed a reading of 4.58, which is slightly higher than October's reading, and indicates a somewhat neutral environment for shippers and carriers. However, FTR said demand is expected to strengthen throughout the year, while a federal mandate requiring that all trucks built after the year 2000 be equipped with electronic logging devices (ELD) by Dec. 31 could reduce capacity as thousands of smaller truckers leave the market rather than the incur the costs and hassles of transitioning from paper to digital logbooks.
The combination of stronger demand and tighter capacity could push the index by year's end into the positive double-digit range, which would translate into higher rates and a better setup for carriers, FTR said.
The ELD mandate is one of the rules expected to be exempt from the Trump administration's scrutiny of governmentwide regulations written during the Obama years. A federal appeals court panel late last year upheld the ELD mandate, and has rejected appeals by a group representing owner-operators to re-hear the decision.
However, it is possible that the mandate will not dramatically affect capacity in 2017, because many truckers may wait until the last minute to either equip their rigs or leave the market.
"All in all, trucking is starting the year off with much better footing than we had one year ago," said Jonathan Starks, FTR's COO, in a statement. Starks added that the "capacity situation has tightened at the same time that volumes have begun to show improvement. The outlook for pricing gains has finally shifted back toward the carriers. That is a welcome relief after the weakness seen over the last year and a half."