Chain of Thought

Shippers Are Doing Fine in 2016... At Least, So Far

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Someday somebody will figure out a way for shipping conditions to be favorable at the same time that overall economic conditions are also favorable, but that day hasn’t arrived yet. The good news, according to the latest Shippers Condition Index, is that the index is at its highest point in recent memory, with a 4.3 reading in January 2016. At the current moment, capacity is believed to be sufficient to meet the demands of the market.

The bad news, though, is that one of the contributors to that positive capacity situation is slow industrial growth, according to Larry Gross, a partner at transportation forecasting firm FTR, which monitors the Shippers Condition Index. What’s more, the index is forecast to drop into negative territory later in the year as worries mount about likely capacity shortages in 2017.

The Shippers Conditions Index is a compilation of factors affecting the shippers transport environment. Any reading below zero indicates a less-than-ideal environment for shippers, whereas a score over zero indicates favorable conditions.

“We are now experiencing the first sustained period of favorable shipping conditions since 2009,” says Gross. “Slow industrial growth and adequate capacity in all modes are combining to create this situation. Positive shipper conditions would continue indefinitely based solely on our economic forecast, but the addition of the regulatory component changes the equation.”

Gross expects conditions to begin to deteriorate from a shipper standpoint throughout the year and begin to approach the electronic logging device (ELD) deadline for trucking companies and other regulatory developments.

FTR-chart-Jan-2016

Meanwhile, in a separate study, the Cass Freight Index indicates that freight shipments slowed to just a 1.4% rise in March, following an 8.3% rise in February. Also, March shipments were down 1.5% from the same month in 2015. Also, freight payments were down 1.0% in March. Capacity, as we’ve seen, was not an issue for any of the modest, so spot prices were flat or down, according to Rosalyn Wilson, president of transportation analyst firm FreightMatters as well as th author of the annual State of Logistics Report.

“2016 is turning out to be difficult to predict,” Wilson notes. “Global economic conditions are still weak and fragile in some economies, adding a level of uncertainty to the U.S. economy.” She goes on to note, though, that “many players in the supply chain remain cautiously optimistic for the rest of the year.”

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David Blanchard

During his career Dave Blanchard has led the editorial management of many of Penton Media’s best-known brands, including the company’s flagship title, IndustryWeek, as well as Logistics...
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