Freight Market Experiences Decline: Study

Following a short improvement in the second quarter, the freight market declined again in the third quarter, as the U.S. Bank shipments index fell below its previous gains.

“There is evidence that capacity continues to leave the industry as shippers had to pay more to move less freight during the 3-month period. In terms of volumes, the freight market has experienced challenges over the past few years,” the study says. “Following some improvement in the second quarter, the goods economy slowed during the summer and early fall. Tariffs continue to impact the freight market in multiple ways, notably within the factory sector.”

Key takeaways:

·        The U.S. manufacturing economy ranks as the second largest globally, accounting for more than 15% of total worldwide manufacturing output. Only China’s manufacturing base is larger. Almost half of imports are unfinished goods vital for manufacturing, so tariffs are hurting factory output. Most manufacturing indicators show little growth or even a decline, and manufacturing remains a major source of freight for trucking.

·        The third quarter saw further reductions in industry capacity due to fleet exits, decreased equipment availability, and regulatory adjustments affecting drivers. These trends are indicated in the U.S. Bank National Spend Index. During this period, shippers experienced higher costs while moving less freight.

·        U.S. Bank data indicates that some of the increased shipper expenses resulted from higher fuel costs, leading to greater fuel surcharges.

·        National shipments and spending – quarter-over-quarter, year-over-year. The U.S. Bank National Shipments Index decreased by 2.9% in the third quarter, offsetting the 2.4% increase seen in the previous quarter. Data from the third quarter suggests continued weakness in the freight sector. Shipments have declined more than 40% since late 2020, with most of this reduction occurring within the last two years.

·        Apart from the second quarter of this year, shipment volumes have dropped each quarter during the past three years. Shipment volumes continue to decline noticeably compared to the previous year. In the third quarter, shipments fell by 10.7% year-over-year, representing a greater decrease than the 9.8% reduction seen in the second quarter.

·        For the year to date, volumes were down 11.5% compared to the same three quarters in 2024. Although industry supply is decreasing, shipper spending hasn’t been as heavily impacted. Capacity is tightening due to slow reductions, affecting pricing: In Q3, shipments declined by nearly 3%, while shipper spending rose 2%. Over the past two quarters, spending increased by 3.2%. In Q3 2024, shippers spent just 1.7% less despite a 10.7% drop in volume, indicating higher rates and less capacity. This can be attributed to fewer fleets and drivers, as well as recent DOT English Language Proficiency (ELP) rule changes.

·        The Northeast and West regions showed freight growth both quarterly and annually, while the Southeast, Midwest and Southwest regions saw double-digit, year-over-year declines for shipments, continuing the freight recession in those areas. Spending patterns varied across regions. The Midwest experienced a decline from the second quarter (-1.4%), while other regions had increases, ranging from 0.3% in the Southwest to 9% in the West. Compared to the previous year, three regions reported higher spending, with the Northeast showing the largest increase (11.7%). The Southeast had a small quarterly gain but registered the largest annual decrease at 8.5%. Spending increased in the Southwest despite lower volumes, likely due to stricter enforcement of ELP rules for truck drivers.

·        During the first two months of the quarter, truck imports at western land ports were mixed. Overall, the region saw a 3% monthly increase from the previous quarter, with California ports performing slightly better than those on the Canadian border. However, both reported nearly an 8% drop compared to last year.

·        Shipments rose 4.4% in the second quarter, marking the year’s third increase for a total gain of 6.8%. This was the largest quarterly jump in four years. Freight levels also climbed 4.6% year-over-year, with spending up 9%, partly due to higher volumes and fuel costs, as well as possible rate hikes. Overall, spending was 6.8% higher than the same time last year.

·        During the third quarter, the Midwest freight market was the only region that experienced declines in both shipments and spending compared to the second quarter and the same period in the previous year. Shipments decreased by 2.2% from the second quarter, following a 2.6% increase in the prior quarter. Freight volumes were 11.5% lower than in the third quarter of 2024. Recent trends in the region have been influenced by factors such as flat or slightly declining consumer spending.

·        Freight levels in the Northeast region have recently increased, but in the Southeast, dropped 2.1% from last quarter and 10% year-over-year, due to a weak labor market and lower household spending. Employers are limiting new hires, although widespread private sector job cuts haven’t occurred yet.

·        During the quarter, truck freight volumes decreased. Shipper expenditures showed mixed outcomes, increasing by 1.6% compared to the previous quarter but declining 8.5% compared to the same period last year. The quarterly rise in spending is partially attributable to higher fuel prices and associated fuel surcharges. While spending increased and volumes decreased, this may indicate ongoing changes in capacity.