Economic Insights by Zo Rahim
Why it matters: Freight rates are climbing and the market’s tightening looks structural, but elevated fuel and producer prices are squeezing the operating margins carriers are trying to rebuild. The question for the rest of 2026 is whether rate gains can outrun rising costs. Big picture: The U.S. economy continues to see stable economic growth, rising business investment, and supportive consumer spending. The re-acceleration of inflation driven by the energy price shock has introduced a cost headwind to consumers and businesses. Elevated energy prices for longer create a greater drag on overall economic activity.
First: The energy price shock is squeezing carriers
- The bright spot: Upward momentum in both spot and contract rates has been positive for carriers this year.
- The shock: A sudden energy price shock this year has pushed fuel costs above what most carriers budgeted at the start of the year, raising cost pressures across the U.S., especially for small and medium-sized operators.
- The result: A direct compression of operating margins.
- The data: The national average on-highway diesel price was $4.80/gallon as of July 13, up $1.04/gallon year-over-year, according to the U.S. Energy Information Administration.
- The caveat: Diesel remains near levels last seen in 2022. For carriers to reduce operating expenses, there needs to be a meaningful decline in diesel prices.
Producer prices are climbing, too
The headline: The Producer Price Index declined 0.3% month-over-month in June but was up 5.5% year-over-year on an annualized basis. Although the overall rate declined in June from the prior month, core producer prices remain elevated well above the Fed’s target this year.
- The driver: Most of the producer price move was related to energy costs, though supply-chain pressures and rising materials costs are also weighing on the transportation industry.
- Where transportation feels it: Trailer manufacturing. The Producer Price Index for truck trailers and chassis rose 0.1% month-over-month and 8.8% year-over-year.
- Why it persists: Inflation-led materials cost pressures, along with tariffs, will continue to provide headwinds to broader trailer demand. Producer prices are likely to remain sticky as steel and aluminum costs stay high and tariff policy shifts; trade and tariff policy has already increased the cost of imported steel, for example.
The freight market is tightening—structurally
- Rates: Spot rates continue to climb.
- Orders: Class 8 orders are running above last year.
- Pricing power: Shippers are paying more even as volumes stay soft.
- The key point: Much of this tightening is structural, driven by capacity exits and CDL enforcement, which points to a durable shift.
What to watch in the second half
- Fuel: Whether diesel prices can see a meaningful move down to relieve margin pressure.
- Producer prices: Whether steel, aluminum, and tariff-driven costs stay sticky and keep pressuring trailer economics.
- Rate momentum: Whether climbing spot rates and higher Class 8 orders hold up as volumes stay soft.
- The key question: Whether cost pressures from fuel, producer prices, and tariffs outpace the rate gains carriers are capturing.
What we continue to monitor
- Goods demand: Any re-acceleration in retail orders and inventory rebuilds would lift freight volumes.
- Industrial activity: Housing, construction, and manufacturing matter because they’re freight-intensive—and sensitive to interest rates.
- Carrier exits: Continued net authority shrink keeps the market tightening.
Bottom line: The freight recession isn’t over, but recovery will come from structural changes with capacity leaving the market. Fuel, producer prices, and tariffs are all pushing operating costs higher, and whether the rate gains carriers are finally capturing can outrun those cost pressures will define the second half. We will continue to monitor developments closely and provide updates as the freight and equipment picture evolves.