Although there has been a considerable amount of uncertainty surrounding the economy, the U.S. truckload market has remained relatively calm, according to data released by RXO.
“Typically, produce season and summer shipping trends drive incremental volatility. While we saw tightening market conditions throughout the second quarter, the freight market has subsequently eased and we’re seeing a continuation of the same trends that have been on repeat since 2023: a muted demand picture leading to lower freight volumes, waning carrier capacity, and a prolonged stable rate environment,” RXO says.
Key takeaways:
· Q2 truckload spot rates remained inflationary, but less so compared to Q1. Truckload spot rates increased 6.5% year-over-year at the end of Q2, down slightly from 9.1% in Q1 (which was down slightly from 11.6% in Q4).
· Q2 truckload contract remained inflationary, but less so compared to Q1. Truckload contract rates increased 1.1% year-over-year, down slightly from 1.4% in Q1.
· The Q2 Curve was lower than Q1 2025 and Q4 2024. In previous truckload market cycles, when shipping events hit during the upswing into inflation, they tend to accelerate market activity (i.e., pouring lighter fluid on the bonfire). In this market cycle, similar to the end of the previous cycle, major shipping events are not having the same impact.
· There has been a considerable amount of volatility in the macroeconomic environment. However, in the United States, real gross domestic product (GDP) rebounded after declining 0.5% in the first quarter. GDP rose at a seasonally adjusted 3% annual rate in the second quarter. Consumer spending increased by 1.4% in the second quarter, offset by weaker business spending. While the U.S. economy is still forecasted to grow again for the full year 2025, it has to contend with several major uncertainties, most notably, the impacts from tariffs and trade policy. I
· Though inflation has eased considerably over the past two years, there is still a significant amount of uncertainty given the potential impacts from changing trade and tariff policy. After April’s Consumer Price Index (CPI) reading (+2.3% year-over-year) was the lowest since 2021, inflation rose in May (2.4%) and again in June (2.7%).
· After consumer sentiment fell to its second lowest level in recorded history in April and May, according to the University of Michigan Consumer Sentiment Index, it rebounded slightly in June (though still tracking at its lowest point since late 2022). Ultimately, inflation and the potential for future interest rate cuts are inextricably linked to changes in trade policy, which, of late, has been highly fluid. Though recent actions have de-escalated global tensions, persistent higher tariffs have the potential to accelerate inflation in the near-term.
· After multiple rate cuts in 2024, the Fed is sitting tight for now, although it was not unanimous. During the July meeting, it was the first time two members of the Fed board dissented in more than 30 years. The Fed has a dual mandate of promoting both price stability and maximum employment. Until inflation begins to ease, or there is a major change in the health of the labor market, dramatic interest rate cuts remain unlikely.
· After 26 straight months of contraction, the Manufacturing Purchasing Manager’s Index (PMI) entered into expansionary territory in January and February. However, since March, the index has sunk back into contraction.
· It’s worth noting that the truckload market is linked to what happens in the wider economy, the two are not always coupled. Given how supply and demand work in the truckload market, it’s possible for the economy to remain strong and the truckload market to languish. It’s also possible for the truckload market to inflate while the economy weakens (see the inflationary Curve in 2008 during the Great Recession). More specifically, looking at the current environment, carriers are combating lagging freight volumes, a continuation of muted spot market rates and inflation in their overall cost structures (labor, insurance, etc.). A continuation of these trends could topple even more carriers who have been barely hanging on for the last year.
· Despite continued headwinds over the past two years, the U.S. economy has avoided a recession (at least for the time being), buoyed by stable consumer spending.
“We expect carrier capacity to continue leaving the market. Though 2025 contract rates slightly increased year-over-year in Q2, spot rates are likely to continue rising at a faster rate,” RXO says. “Eventually, spot rates will overtake contract rates, and this divergence will drive volatility as cash-strapped carriers look to increase profitability after a very difficult two years. All that said, while we are in an inflationary rate environment, we don’t anticipate the sort of extreme conditions we experienced in the last inflationary market in 2020 and 2021. Based on recent history and current market dynamics (shrinking but still available capacity, stable demand), it’s quite possible we’ll see a lower potential market peak; for guidance, a look back to 2014 would likely be a better comparison.”
