Despite a dip from historically high levels in June, business conditions in the trucking sector remained strong in July, according to a measure from transportation analysis firm FTR.
FTR’s Trucking Conditions Index (TCI) for July declined to 12.4 – an historically strong reading – after the two most favorable months for carriers ever in May and June. The main variable causing that “modest deceleration” was less upward pressure on freight rates, a change which was partially offset by tighter capacity and lower financing costs.
“While we still see truck freight market conditions as favorable for carriers during the two-year forecast horizon, the period of extraordinary improvement might be over,” Avery Vise, FTR’s vice president of trucking, said in a release. “The biggest wild cards remain whether pressure on foreign truck drivers and other enforcement efforts keep capacity growth in check and whether the buildout of data centers continues at its current pace into next year or beyond. If either of those situations prove to be the case – and certainly if both do – trucking conditions could remain robust.”
Despite the likelihood of those favorable conditions, other forces could weigh down the sector. “Diesel prices are another concern, of course, although for much of the market they are mostly a pass-along cost. However, if spot rates were to soften while diesel prices are at a near-record level, trucking companies might find themselves with an ample supply of drivers who previously worked for failed small carriers. The result could be akin to the sharp increase in truckload employment in 2022 following Russia’s invasion of Ukraine,” Vise said.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index number, a positive score represents good, optimistic conditions, while a negative score represents bad, pessimistic conditions.
