After a brief mid-year lift, the freight market lost ground in the third quarter as volumes slipped and shippers paid more to move fewer loads. U.S. Bank’s latest national freight data shows that capacity continues to exit the market and fuel costs are pushing up rates, underscoring an uneven recovery across regions and modes.
Manufacturing Slowdown and Tariffs Add Pressure
A cooling goods economy and tariff headwinds continue to weigh on freight activity, particularly in manufacturing-heavy corridors. U.S. Bank data shows the Shipments Index fell 2.9% in Q3 after a 2.4% gain in Q2, reversing the prior quarter’s modest momentum. Volumes remain more than 40% below late-2020 levels, with most of the decline concentrated over the last two years.
Factory output remains a critical swing factor. The United States still holds the world’s second-largest manufacturing base, contributing more than 15% of global production, but recent indicators point to stagnation. Nearly half of U.S. imports are unfinished inputs for factories, meaning tariff regimes continue to ripple through production and trucking demand. According to trade data, U.S. manufacturing PMIs hovered near contraction territory through the summer, reinforcing weak freight flows in industrial regions.
Capacity continues to shrink, though not fast enough to stabilize pricing. Fleet exits, tighter equipment availability, and regulatory changes around driver language proficiency have removed incremental capacity, yet not at a pace that fully offsets soft demand. That imbalance shows up in costs: in Q3, shipments fell nearly 3%, but spend rose 2%. Over the past two quarters, spending increased 3.2% even as volumes fell sharply year-over-year, driven in part by elevated fuel prices and surcharges.
Supply is thinning gradually, but demand is contracting faster, prolonging pricing pressure and creating volatility in trucking spot markets. Recent data shows that outbound tender volumes remained subdued through early fall, and routing-guide compliance improved, signs that shippers are securing capacity without stretching budgets, despite higher fuel bills.
Regional Freight Dynamics Reveal Uneven Conditions
The freight downturn remains uneven across the country, with pockets of resilience offset by steep declines in key consumer and industrial regions.
The Northeast and West posted both quarterly and annual shipment gains, supported by port activity and service-sector resilience. The West, in particular, saw spending rise 9% quarter-over-quarter, the strongest regional gain, despite mixed truck import patterns at land crossings. California ports outperformed Canadian-border crossings but still posted an 8% annual decline in truck volumes.
By contrast, the Southeast, Midwest, and Southwest recorded double-digit year-over-year shipment declines, reflecting softer labor markets, consumer pullbacks, and regulatory enforcement on driver language rules in cross-border lanes. The Southeast fell 10% year-over-year and 2.1% from Q2, dragged by weaker household spending and slower hiring.
The Midwest posted the most acute pressure, with shipments down 2.2% from Q2 and 11.5% year-over-year, the only region where both volumes and spending declined quarter-over-quarter and year-over-year. That contraction aligns with flat consumer outlays and more conservative manufacturing investment across automotive and machinery verticals.
Despite the downturn, freight spending increased in most regions quarter-over-quarter, indicating tightening capacity in select lanes and higher fuel costs. The Northeast recorded the largest year-over-year spending increase at 11.7%, even as demand remains uneven. Meanwhile, Mississippi River and Ohio Valley markets continued to see slower freight flows, driven by restrained inventory cycles and subdued housing-related demand.
The Q2 rebound, which saw shipments rise 4.4% and spending jump 9%, now looks like a temporary reprieve rather than an inflection point. Freight analysts referenced at the time that supply-chain normalization and peak-season preparation boosted activity; those effects faded as summer progressed.
What the Latest Freight Pullback Signals Next
The mixed signals, shrinking capacity but falling demand, point to an industry still digesting post-pandemic imbalances. While transportation capacity is slowly recalibrating, the reset has been slower than many expected, particularly as carriers attempt to weather fuel swings and regulatory shifts without conceding rate discipline. Recent earnings commentary from major 3PLs echoes this dynamic, with several noting that while carrier exits are supporting long-term pricing stabilization, demand softness is delaying a sustained rate recovery.
