FTR’s Trucking Conditions Index improves marginally in August to near-neutral reading

FTR’s Trucking Conditions Index (TCI) barely improved in August to -0.25 from the previous -0.7 reading in July. The marginally stronger trucking conditions were due almost exclusively to falling diesel prices. The largest negative factor was financing costs as the Federal Reserve continues to battle inflation through sharp increases in the federal funds rate. Meanwhile, freight market dynamics were slightly weaker in August than in July, although freight volume was still a tiny positive contributor to the index calculation. FTR still sees trucking market conditions in a period of moderate weakness at least through 2023.

Avery Vise, FTR’s vice president of trucking, commented, “Although truck freight dynamics are softening broadly, smaller carriers likely will see a disproportionate negative impact in overall financial conditions due to sharp increases in financing costs and great volatility in diesel prices. Because small carriers are less likely to have reliable fuel surcharges in place, they typically feel the effects of changing diesel prices more profoundly than larger carriers do. That situation helped in July and August as diesel prices fell, but it will turn out to be a big negative in October at least. Small carriers also are less likely than larger ones to achieve comfortable financing terms for equipment and other needs for capital.”

Details of the August TCI are found in the October 2022 issue of FTR’s Trucking Update, published on September 30. The October edition also includes key takeaways from FTR’s September Transportation Conference that suggest that the market is likely normalizing but not collapsing. 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 prices, and financing costs. 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.