Wait…This is the slow time for the shipping industry?
Today we’re going to take a look at one of the metrics you see on a weekly basis, the Market Demand Index. The MDI was designed to give us a high level gauge of the supply and demand of the trucking industry. An MDI between 15 and 20 represents the equilibrium for a healthy industry where shippers are able to find carriers and there is a suitable balance between capacity and utilization.
Historically, January and February have shown to be lighter months in terms of the shipping environment. The graph above represents the average MDI of weeks 1-8 of the last five years. In 2014 we were seeing a definite pinch in the business that favored carriers, there was little worry about finding a load to move. 2015 and 2016 saw things balance out a bit, dropping below ten. This put the capacity constraints back into balance. In 2017 it seemed we spent the year discussing the upcoming capacity crisis and based on what we are seeing in the first few weeks of 2018, we can confidently say that those worries through 2017 were justified.
What’s Driving This Constraint?
We’re seeing a combination of factors that the market is unsure of right now….the ELD Mandate which had a soft passing in mid-December with full implementation coming on April 1, as well as a strong run in the economic data month after month relating to Industrial Production, GDP, home building, and sales.
Although the run up we have seen in the last few months has been impressive, we are seeing a bit of a cooling in these economic indicators in the last few weeks. Will it translate into a bit of a breather in the MDI, stay tuned over the next few weeks to find out.
This post first appeared on Trans4Cast.com.