FTR’s Trucking Conditions Index for January still strong, but war raises downside risks

FTR’s Trucking Conditions Index (TCI) for January fell to 11.46 from 14.45 in December amid rising diesel prices. Although more robust freight rates more than offset the effects of higher fuel costs, freight volume was a significantly weaker positive factor than it had been in December. A record surge in fuel costs in the wake of Russia’s invasion of Ukraine certainly will hit trucking conditions in the near term, but the longer-term effects of geopolitical tensions are not yet clear. For now, the TCI outlook remains positive, but the downside risks have increased greatly.  

Avery Vise, FTR’s vice president of trucking, commented, “The war in Ukraine has introduced a high level of uncertainty into the dynamics of truck freight. Sharply higher fuel costs for carriers are a given, but we do not yet know whether sharply higher gasoline prices on top of strong pre-existing consumer inflation and big swings in the stock market will lead to a drop in consumer spending. Another important factor is the fate of small trucking firms – especially the tens of thousands of for-hire carriers created since mid-2020 – following the unprecedented surge in diesel prices. Many will fail, but whether that outcome strengthens or weakens today’s rate leverage for carriers depends greatly on whether failing carriers’ drivers quit the industry or return to driving positions for larger carriers. We generally would presume the latter, which could relieve some rate pressure, but the labor market has changed too much during the pandemic to make that a sure bet.”

Details of the January TCI are found in the March 2022 issue of FTR’s Trucking Update, published February 28.   The March edition also includes commentary highlighting the potential risks to freight demand of recent sharp gains in retail inventories.

Beyond the TCI and additional commentary, the Trucking Update includes data and analysis on load volumes, the capacity environment, rates, and the economy.

The TCI tracks the changes representing five major conditions in the U.S. truck market. These conditions are: freight volumes, freight rates, fleet capacity, fuel price, and financing. The individual metrics are combined into a single index indicating the industry’s overall health. A positive score represents good, optimistic conditions. Conversely, a negative score represents bad, pessimistic conditions. Readings near zero are consistent with a neutral operating environment, and double-digit readings in either direction suggest significant operating changes are likely.