The U.S. truck freight market saw a reversal in the third quarter, with conditions deteriorating and reversing a brief second-quarter improvement, according to a new report by freight audit and payment provider U.S. Bank. Compared to the second quarter, national shipment volumes fell 2.9%, while shipper spending increased 2%, according to the latest U.S. Bank Freight Payment Index.
A theme to watch is the ongoing divergence between falling freight volumes and higher freight costs, suggesting that carriers continue to exit the market despite higher rates being paid for freight. The report notes, “There is evidence that capacity continues to leave the industry as shippers had to pay more to move less freight during the three-month period.”
While the quarterly change from the second quarter to the third quarter showed higher rates, when comparing the data to last year, both freight shipments and freight spend indexes fell. Shipments are down 10.7% compared to last year, while freight spend is down 1.7%.
Tariffs, manufacturing and consumer spending weigh down volumes
The report notes that freight volumes continue to be negatively impacted by tariffs, notably in the factory sector. Additionally, the goods economy slowed with housing and consumer spending tightening, creating less demand for freight.
“The freight market faced renewed pressure in the third quarter, with areas key to the trucking industry like manufacturing, construction, and consumer goods spending showing signs of strain,” said Bob Costello, senior vice president and chief economist at the American Trucking Associations, in the release. “Despite a brief rebound in the second quarter, challenges continue to weigh on freight activity.”
Paradoxically, while tariffs are intended to bring more domestic manufacturing back via higher costs, the report notes that the U.S. already has a substantial manufacturing output, just in more complicated and finished goods.
“The United States 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 report said.
On the rate side, things were looking a little better
While there were fewer shipments, the rates paid for both contract and spot freight saw improvement. Data from DAT were noted in the U.S. Bank report, showing both spot-market and contract freight rates increased by 3 cents per mile (1.4% and 1.1% respectively) compared to the second quarter.
Compared to last year, both spot and contract rates saw gains. Spot rates rose 1.4% year-over-year, while contract rates gained 0.7%.
Additionally, regulatory changes have also impacted the market. Since June 25, the Department of Transportation has enforced English-language proficiency rules more strictly, with failing roadside tests now resulting in out-of-service status. The report notes between late June and September, more than 5,000 drivers nationwide were deemed out of service for ELP violations, with the policy having an outsized impact on the Southwest region.
A regional review shows some winners and some losers
When looking at specific regions, the report noted there were stark differences depending on the region.
The Northeast and West led in a freight recovery, while the Southwest, Southeast and Midwest continued to face ongoing challenges. The Northeast region posted growth across all metrics, with shipments increasing 0.6% quarter-over-quarter and 6.3% year-over-year. Spending rose even more dramatically, up 5% for the quarter and 11.7% compared to the third quarter of 2024. Manufacturing activity drove much of this improvement, with the Federal Reserve Bank of Philadelphia reporting that 46.2% of manufacturers in the region experienced higher production.
Similarly, the West region showed strong performance, with shipments up 4.4% quarter-over-quarter and 4.6% year-over-year. Spending increased by 9% compared to the previous quarter. International trade played a key role in this growth, as the Port of Los Angeles processed an unusually high volume of 2 million containers in July and August, with many shippers importing goods early to avoid new tariffs.
In stark contrast, the Southwest region experienced a 15.7% decrease in freight levels from the previous quarter and a 32.8% drop compared to the third quarter of 2024. Despite these volume declines, spending increased slightly by 0.3% quarter-over-quarter and 3.8% year-over-year, suggesting significant capacity constraints in the region.
The Midwest was the only region to report declines in both shipments and spending, with volumes down 2.2% from the second quarter and 11.5% year-over-year. Spending fell 1.4% for the quarter and 6.3% compared to the previous year. Flat or declining consumer spending and reduced cross-border freight with Canada contributed to these decreases.
The Southeast region continued to struggle, with shipments down 2.1% for the quarter and 10% year-over-year. The region has not experienced a year-over-year increase in shipments since the third quarter of 2021. Despite the volume decrease, spending rose 1.6% quarter-over-quarter but remained 8.5% below third-quarter 2024 levels.
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