When inflation rises without a corresponding increase in the gross domestic product (GDP), economists use the term “stagflation.” The term could also be used to describe July’s freight market.
July improvements in freight volumes or rates were hard to see, according to most of the available analyses — and tariffs are getting the blame.
Analysts at FTR Transportation Intelligence noted that GDP growth is expected to hover near 1% for the remainder of the year, even though the Consumer Price Index is running at an annual rate of about 3.5%.
Speaking at an Aug. 22 symposium in Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell described current risks to inflation and a slowing labor market as “a challenging situation.”
The balance of those risks, he said, could warrant adjusting the Fed’s stance, meaning a likely cut to its key interest rate at its Sept. 17 meeting. The current Fed benchmark short-term rate has been unchanged, hovering between 4.25% and 4.5% for the past five meetings.
Tariff policy is having an impact.
President Donald Trump’s policy of imposing new or increased tariffs on imports into the U.S. has impacted the markets, in some cases increasing consumer purchase in advance of tariff effective dates.
The downside is that retailers have reduced their inventories, ordering fewer imports to restock their shelves to avoid absorbing higher tariff costs.
It can be argued that tariffs will eventually result in more products being manufactured in the U.S. rather than imported, creating jobs and stimulating the economy — and some businesses are already moving manufacturing and warehousing from foreign locations to the U.S.
However, these actions take time. While consumers and businesses withhold spending waiting for better days, the economy slows.
This slowing is definitely showing up in the freight market.
The Cass Freight Index for Shipments reported a 1.8% decline in shipments from June to July this year — and a 6.9% decline compared to July 2024 shipment numbers.
The Cass Expenditures Index also declined by 1.5% from June. Compared with July 2024, the Expenditures Index rose 0.4%, not keeping pace with costs that have risen since then.
Analysis accompanying the report explained that at least some of the increase might have been due to some shipments moving from the less-than-truckload market into truckload.
The Cass report is comprised from billing data from Cass Information Systems customers and includes multiple modes of transport, including truck, rail, pipeline, ship and air, with the preponderance moving by truck.
“Freight volumes are experiencing one of the air pockets we’ve warned about in recent months,” said Tim Denoyer, vice president and senior analyst for ACT Research, in his summary of the report.
He said more “air pockets” are expected, adding, “Tariffs are also raising vehicle prices, and the heavy truck makers are reducing production.”
Denoyer noted that North American production of Class 8 trucks is expected to fall more than 25% in the second half of the year, compared with the first half.
The “silver lining,” he explained, is that reduced truck production will tighten capacity in the trucking market. With fewer trucks available to haul freight, perhaps freight rates will rise for next year.
Two factors could work to push truck production in the other direction, however: First, if the Fed cuts its rates — and especially if the rate is cut at two or three consecutive meetings — the cost of financing new equipment could be reduced. The other factor is the EPA decision to rescind planned emissions mandates that were expected to result in price increases of $25,000 or more per truck.
It’s difficult to predict where transportation equipment costs will end up in the coming months.
The American Trucking Associations (ATA) For-Hire Truck Tonnage report continued its up-and-down pattern, rising by 0.6% in July after falling in June.
“July truck tonnage increased sequentially, but did not erase the 0.7% decline in June,” said Bob Costello, ATA’s chief economist. “Since March, truck tonnage has been in a tight range. The good news is truck freight volumes haven’t fallen much over that period, but we are not seeing many increases either.”
The ATA tonnage report is calculated using survey data submitted by its members and represents primarily contract freight.
The “Trendlines” report from DAT Freight & Analytics showed average spot rates for dry van declining in July by 0.5% from June rates and remaining even with July 2024 rates at $2.06. Refrigerated rates fared better, rising 1.3% in July from June — but they declined 0.4% from July 2024 rates to average $2.42 for the month. Flatbed spot rates were worse, dropping 0.8% from June and 0.4% from last July, averaging $2.55 per mile.
In the meantime, the Institute of Supply Management (ISM) Services Index dropped to 50.1 in July, with 50 representing no change and anything less indicating contraction. New manufacturing orders and jobs all moved lower in the month. Prices are increasing, but economic activity is not so there’s no reason to think that freight volumes are on the way up.
The stock market has been soaring, with new records being set regularly. At the same time, permits for new homes have declined 12% since February, reducing load opportunities for building materials, appliances and other products.
FTR‘s Trucking Conditions Index (TCI), which tracks freight volumes, rates, fleet capacity, financing costs and fuel prices, dropped to its lowest point this year in June. Lower freight rates and increased fuel prices were the largest contributors.
“We still forecast a steadily but only modestly more favorable market for carriers next year,” said Avery Vise, FTR’s vice president of trucking.
“However, swings in freight volume and fuel prices — and to a lesser extent, freight rates — continue to generate volatility in trucking conditions,” he continued. “At least in the near term, though, we still believe forecast risks are weighted more to the downside than the upside.”
Trucking businesses that are hanging on through difficulties aren’t likely to find much relief in the coming months, with ACT’s Denoyer predicting that rising prices will dampen consumer spending at least temporarily.
In the meantime, cost efficiency is mandatory for truckers who remain in survival mode until conditions improve.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
