Here's a chilling thought: There's little relief in sight from the capacity crunch until the next recession comes along.
We’ve been hearing since before the Christmas holidays about how lousy weather was largely to blame for the economy taking an unexpected nosedive, but now that we’re well into the year, it turns out that good weather isn’t providing the kind of boost people were hoping for. Shippers in particular shouldn’t get too comfortable right yet, as the latest Shippers Conditions Index (SCI), a monthly gauge of the shippers transport environment as measured by transportation forecasting firm FTR, points to only a very modest improvement. Trucking capacity still remains extremely tight.
“The shipping situation is not as critical as it was just a few months ago when weather-related issues disrupted the supply chain,” notes Eric Starks, president of FTR. “However, we are still near a tipping point. If the economy starts to accelerate as we move through the summer months, additional strain would be put on an already fragile capacity situation.”
The current SCI reading is -7.7, a score that reflects the 98-99% readings for truck capacity utilization, “with little relief in sight until the next recession.” Take a moment and let that phrase kick around in your brain again: “little relief in sight until the next recession.” Of course, what FTR means is that the capacity situation won’t really ease up until there are either more trucks on the road (not likely anytime soon) or the economy slows down to the point where there is less freight to haul (unfortunately, a more likely scenario).
Whenever the SCI dips below zero, that indicates a less-than-ideal environment for shippers. Readings below -10 signal that conditions for shippers are approaching critical levels, based on available capacity and expected rates.
Starks also cautions to expect motor carriers to push rates higher throughout the year. “The biggest pressure,” he says, “will come from trucking companies who continue to struggle finding qualified drivers to move freight.”