In search of lost demand

By Jason Miller

The 2025 US freight market, especially the domestic truckload sector, underperformed expectations held at this time last year. The US Bureau of Labor Statistics’( BLS) truckload producer price index( PPI), an estimate of the prices long-haul general freight carriers receive for trucking services, was down 1.8 % year over year as of September, despite diesel prices rising 5.4 % in the same period.

This raises the question: why did the market underperform expectations, including my own prediction that the truckload PPI would climb between 6 % and 10 % year over year by late 2025?

The strongest culprit for the underperformance was the Trump administration’ s tariffs, and more specifically, the uncertainty created by their inconsistent implementation, with expansions and rollbacks often coming at a moment’ s notice.

Such uncertainty causes firms to postpone difficult-to-reverse investments, such as hiring new workers and expanding operations. Consistent with this, hiring by private employers reported by the BLS’ s Job Openings and Labor Turnover Survey program has fallen to levels not seen since 2010, and manufacturing survey data on capital investment intentions aggregated across five regional Federal Reserve banks fell sharply in February after rising strongly in December 2024 and January 2025.

With this in mind, I expect demand for trucking services to show limited growth in the first half of 2026, with the potential to improve in the second half.

Seasonally adjusted single-family housing starts have consistently been down 7 % to 11 % year over year from March through August, the most recent data available, except for July. Improved housing activity has the potential to be the greatest catalyst for improved freight demand.

While cuts to the federal funds rate will make the financing of construction projects more affordable, uncertainty about raw material prices and labor availability— due in part to immigration crackdowns— may keep activity from rebounding as strongly as we would expect under conditions where the Federal Open Market Committee is loosening monetary policy.

Manufacturing demand likewise remains muted, with seasonally adjusted new orders aggregated across five Federal Reserve banks falling back into contraction in November. Historically, multiple months of this index exceeding 7.5 have preceded turns in truckload pricing dynamics in carriers’ favor within a few months. In contrast, sharp falls in this index have accurately predicted weakening market conditions.

Interest rate cuts should spur demand for manufactured goods, but elevated economic policy uncertainty can mute the demand-generating impact of interest rate cuts. Likewise, the Institute for Supply Management’ s separate manufacturing survey continues to suggest weak conditions at US plants.

One sector likely to see continued strong demand through 2026 is the construction of data centers. Data center construction has more than doubled since 2023 and has helped counterbalance slower construction of warehouses. The need to equip data centers is further spurring demand for imported computers and electrical goods. Given weakness in other manufacturing sectors, such as paper— which generates more ton-miles of freight than transportation equipment plants— it is imperative carriers closely monitor for any signs of slowing data center construction activity.

Regarding supply side dynamics, while much has been written about heightened enforcement of English-language proficiency( ELP) requirements, non-domiciled commercial drivers’ licenses, and immigration enforcement of carriers in California, I remain skeptical that supply side reductions alone will shift pricing dynamics in carriers’ favor. DAT’ s most recent spot market pricing data showed that spot rates, adjusted for fuel prices, underperformed in November relative to October across dry van, refrigerated and flatbed sectors compared with the same months in prior years.

This is why demand factors will be front and center in 2026.

email: mill2831 @ broad. msu. edu

Manufacturing orders decline in 7 of 9 months through November

Aggregate manufacturing new orders purchasing managers ' index PMI; a reading of 0 or greater indicates expansion

PMI

10 7 5

-700-5-10-15-20

Jan L 2024 Jul

Jan 2025

Source: Federal Reserve Bank

New orders PMI

Data center development is helping to counterbalance slower warehouse construction.

Jul

Nov, 2025

January 5, 2026 | Page 69

In search of lost demand