Fuel prices, inflation, and global uncertainties are starting to put a drag on both trucking and the economy, according to the latest FTR Trucking Conditions Index.
The freight market analyst says the index for March was negative for the first time since May 2020, caused by record diesel prices and, to a lesser extent, weakening freight rates.
Although the outlook for trucking conditions generally is for modestly positive conditions, FTR said, uncertainty is rising in several key areas, including fuel costs, capacity utilization, and rates.
“Given the unprecedented surge in diesel prices during early March, a negative reading for the Trucking Conditions Index was hardly surprising,” said Avery Vise, FTR’s vice president of trucking. “Fuel costs apparently will represent a big negative factor for May as well.”
The pendulum of the freight cycle is swinging back, said ACT Research in its latest freight forecast
“As recently as the start of the year, pricing power in the truckload market was firmly with fleets,” said Tim Denoyer, ACT senior analyst. “But once a pendulum gets going, it’s very hard to stop.”
ACT reported that the supply-demand balance in its for-hire survey turned loose this month for the first time since June 2020, “as the rebalancing, drawn-out by the pandemic, hit critical mass,” Denoyer said.
Spot rates for dry van and refrigerated freight have been sliding in the Truckstop.com system for most of 2022. As of its May 16 report, dry van spot rates are down about 69 cents from the record level posted at the end of 2021. Dry van rates were nearly 12% lower than the same 2021 week — but nearly 31% lower if the fuel surcharge is excluded. It’s a similar story with refrigerated spot rates, down nearly $1.33 since hitting a record at the end of 2021, 16% below the same 2021 week but about 33% lower excluding the fuel surcharge.
Kenny Vieth, ACT president and senior analyst, said “the economy is walking a fine line in 2022,” with the effects of inflation, uncertainty about the war in Ukraine, and the impact of Chinese COVID lockdowns on global supply chains. Trucking industry profits tend to lag the freight cycle, so are likely to peak around the third quarter of 2022, he predicted.
“The road ahead looks treacherous, but it is not necessarily bad for carriers,” said FTR’s Vise.