Freight recovery faces fresh headwinds

“We are seeing soft tonnage levels, but capacity is still contracting, which is leading to a better market for motor carriers,” Costello said. (vitpho/Getty Images)

The freight market gained some momentum in September, as shrinking capacity helped offset flat demand and pressure from fuel costs.

American Trucking Associations’ For-Hire Truck Tonnage Index increased 0.8% from the previous month to 114 from 113.1 but was unchanged from a year earlier. Regulatory and market factors continued to reduce capacity. Freight tonnage was up 0.9% during the first nine months of 2026, reflecting robust growth earlier in the year.

“Truck tonnage ended the quarter on a better note, but weakness in July and August pushed the third quarter reading into negative territory both sequentially and from a year earlier,” ATA Chief Economist Bob Costello said. “We are seeing soft tonnage levels, but capacity is still contracting, which is leading to a better market for motor carriers.”

Freight conditions slowly improve

The Logistics Managers’ Index increased 3.6 points from the previous month to 70.2 in September, the second-highest reading in four years, behind only June’s. The report said rising inventory costs spurred inventory growth. Transportation capacity contracted for the 10th consecutive month, while prices continued to rise.

The Cass Freight Index showed shipments rose 1.9% year over year to 1.062 from 1.042 and 2.3% from the prior month’s 1.038. The report said freight demand is recovering amid modest retail and industrial growth and some inventory restocking, but rising oil prices and interest rates are limiting the upturn.

“Right now capacity is still tight; we can see that in tender rejection rates,” said Jason Miller, professor of supply chain management at Michigan State University. “Freight volume growth is modest, but again, it’s really concentrated into shipper verticals that are benefiting from the AI ecosystem buildout.”

Miller identified food and beverage, single-family housing and related sectors such as furniture and lumber as weak spots. He said the month’s average spread between spot and contract rates was consistent with a tight market favoring carriers.

“Maybe a smaller vertical, but that’s still growing is, call it healthcare, life science,” Miller said. “We can still see just really strong sales on that front, and wholesaling, and we know that’s generating some freight volume as well.”

Miller said uncertainty surrounding the AI ecosystem buildout, interest rates, tariffs, fuel costs and a possible return to large-scale fighting in the Middle East is influencing the market. Iran and its allies have helped drive fuel costs higher through efforts to cut off key shipping lanes.

Fuel costs remain major headwind

“Diesel has been very elevated for the last two, three months, more than the gasoline,” said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. “It’s now becoming an inflation problem for the trucking business, which means the supply chains are going to feel the cost pressure, and that will start to show up in the upcoming CPI reports.”

The Energy Information Administration reported national diesel prices have risen 73.4% from a year earlier to $6.28 a gallon. Miller warned that a return to large-scale fighting in the Middle East could push diesel to $7 a gallon.

“If I look, for example, at the futures market price for home heating oil, which is a good proxy for diesel, we’re moving sideways right now,” Miller said. “We’re down a little bit from those highs we were at in September that drove diesel to $6.50 a gallon. But right now there’s no reason to expect diesel to drop below $5.50 a gallon.”

Prolonged damage to major fuel infrastructure during the war could push diesel above $10 a gallon, Miller said, raising the risk of an economic downturn.

“That would be the point the economy would fall into a recession,” Miller said. “If gas would go to $6 or $7 a gallon, and diesel goes to $9 or $10, I don’t see how the economy doesn’t fall into a recession at that point.”

The downstream impacts

Higher energy costs will raise prices for items such as food because they affect multiple points along the supply chain, Dhawan said. The resulting price increases will reduce consumer demand.

“I heard a very interesting thesis that those tariff refunds that started a few months ago were very helpful for the companies to absorb the increased cost of shipping,” Dhawan said. “And the consumers did not see that much of an increase in prices.”

President Donald Trump has relied heavily on tariffs to advance his trade agenda. On Feb. 20, the Supreme Court struck down many of these tariffs, which were enacted under emergency powers. The government was subsequently ordered to refund affected importers. But those refunds can only go so far in cushioning rising costs, in Dhawan’s view.

“So no matter what refunds you are getting, you need to now pass on the cost, and that pressure will show up this winter,” Dhawan said. “And even if they have the supply, it takes a tanker 40 days to come to bring the diesel, so there’s no relief on the horizon that quickly.”

An escalation around the Strait of Hormuz, which Dhawan sees as more likely after the Nov. 3 midterm elections, could further raise diesel prices, he said. He also doubted that efforts to increase diesel supply, such as a recent deal with Russia, would ease prices, which are driven by the global market rather than domestic supply.

“The funny thing is that we have enough diesel,” Dhawan said. “The rest of the world doesn’t have it, so they end up buying our excess diesel, and if you are a refinery, and somebody is willing to pay you more money for your diesel, you will sell it to them.”