BLOOMINGTON, IN – The health of the U.S. trucking industry worsened again in May, hitting its lowest level in three years, according to freight transportation forecasting firm FTR. But those same forecasters promise better times are on the way.

Its Trucking Conditions Index (TCI) dropped another 25% to a reading 4.91 due to softer capacity, pricing, and fuel prices.

Tight capacity from earlier in the year has eased following the partial suspension of the latest hours of service changes in the U.S.

FTR predicts the Trucking Conditions Index will soon move up into significantly more positive territory as the anticipated regulatory drag in 2016 and 2017 dramatically tightens capacity.

For the overall trucking environment, improvements in productivity and reductions in fuel prices have kept costs in check until now, according to FTR, However, with the U.S. economic recovery now fully maturing, fuel and other costs, like labor, should increase, putting more pressure on rates in early 2016.

“While the market has notably softened, conditions for fleets are still quite positive and indicate how well they are able to manage the current headwinds,” said Jonathan Starks, FTR’s director of transportation analysis. “One significant benefit is that fuel costs have dropped substantially and have yet to significantly rise. A sharp rise in diesel would be very troubling for many of the marginal carriers.”

Another upside, Starks said, has been the slow growing freight environment which has allowed fleets to re-engineer their lanes in order to take better advantage of drivers hours.

“While the capacity situation has definitely eased since last year, it is still well above historical levels and should keep contract rates, at minimum, stable with a potential to grow stronger by early 2016,” he said. “Overall, the market is stable, and we see that path continuing until we get into 2016, when recession and regulatory risks begin to rise significantly.”