Improved Freight Demand Could Increase Equipment Purchases
Source: FTR
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Source: FTR
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FTR’s Trucking Conditions Index for April rebounded more than four points from March, showing improving conditions despite weak growth in the contract freight market.
The April TCI hit a reading of 7.03, showing that freight demand is moving higher as the industrial sector continues to improve, with capacity tightening. The first quarter of 2017 registered the strongest freight growth of the current economic recovery, according to FTR.
“Overall, our expectation of improvements in freight demand for 2017 are coming to fruition,” said Jonathan Starks, chief operating officer at FTR. “However, we are seeing a significant difference between the contract carriers, specifically those in more dedicated routes, and the spot market.”
The Trucking Conditions Index tracks the changes representing six major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fleet bankruptcies, fuel price, and financing. The individual metrics are combined into a single index that tracks the market conditions that influence fleet behavior.
FTR expects to see modest growth for the rest of 2017 and it is projecting the index to fall off in the next few months but remain in mid-range positive territory through 2018. Spot market load activity in early June was up more than 50% compared to the same time last year and the average rate has increased 10%, according to Starks.
“We typically see spot markets move prior to the contract arena, so we would expect to see stronger contract pricing negotiations as we finish 2017 and head into 2018,” said Starks. “The market is gaining strength, and conditions for carriers are showing significant improvements.”
With improving conditions, fleets also appear to be looking to buy new equipment. ACT Research’s For-Hire Trucking Index indicated that May’s purchase intentions are high, with 61% of responding fleets planning to buy new equipment in the next three months. ACT says purchase …Read the rest of this story
