Sector snapshot and prolonged stagnation

The U.S. full truckload (TL) market, valued at roughly $387 billion, has been effectively stalled for about three years, and any recovery has been slow and uneven. Carriers are facing a protracted freight recession driven by excess capacity and soft demand, with industry participants cautiously expanding fleets only in modest increments.

One visible symptom of the downturn: spot rates have dipped below $2 per mile since the spring of 2022, underscoring the weak pricing environment that many operators are navigating.

How tariffs and economic forces are shaping demand

Multiple analysts point to tariff policy and other macroeconomic factors as contributors to the falloff in freight volumes. Market data from Uber Freight quantifies potential impacts of tariff increases on truckload demand:

• A 1% tariff rise could cut TL demand by about 0.15% or more
• A 10% tariff increase could lower demand by roughly 2%
• Tariff levels in the 18% to 28% range might depress demand by approximately 4%–6%

Jonathan Starks, CEO of freight forecaster FTR, summarized the situation bluntly: “Transportation has been exceptionally impacted and will continue to remain in flux until at least the end of the year.”

Volume lows and the tactical response from shippers and carriers

First-quarter freight volumes reached their lowest point for any calendar year, a condition that can favor transactional shippers hunting for marginal per-mile savings but is unwelcome for tens of thousands of dry-van operators who have endured nearly three years of recessionary conditions.

The industry's prevailing maxim—“Make your money when you can”—helped prompt moves such as J.B. Hunt’s decision to implement peak-season surcharges earlier in the year. That step was largely a reaction to global trade complications and the front-loading of shipments intended to avoid anticipated tariff increases.

Why market concentration remains low and driver labor pressures persist

Even the largest TL carriers control only a sliver of the overall market—barely 1% each—because truckload operations generally avoid heavy real-estate terminal networks and instead run direct Point A-to-B services. This structure keeps barriers to entry relatively low and tends to reward the lowest-cost operators.

In the non-union TL sector, the challenge of attracting and retaining qualified drivers continues to be a chronic issue, with direct consequences for capacity, cost structure, and overall operational performance.

Quarterly financial snapshots from major carriers

Performance has varied across large public TL companies.

• Knight-Swift, parent of the nation’s second-largest truckload carrier, reported $72.6 million in consolidated operating income for the second quarter, a 14.4% year-over-year increase. Knight’s truckload division led gains, while its newly formed less-than-truckload (LTL) unit posted a substantial decline versus Q2 2024 and the intermodal arm recorded a widening operating loss. As Knight CFO Andrew Hess said, “Overall, most segments experienced pressure on revenue year over year with a soft freight environment.”
• Heartland Express, ranked 13th among TL carriers, saw operating revenue fall 23% to $210 million in Q2 and reported an operating ratio (OR) of 106, signaling a difficult quarter.
• P.A.M. Transport’s trucking division reported an OR of 112.5 in Q2.
• Covenant Logistics Group reported relatively flat combined revenue across its expedited and dedicated TL segments; CEO David Parker observed, “We believe that general freight market fundamentals are slowly improving, although progress is uneven.”
• Landstar, the fifth-largest carrier, limited forward guidance entering Q3 because of economic uncertainty; its automotive segment declined about 17%, and management cited tariff effects and interest-rate sensitivity as contributors to a sluggish outlook.

Rail consolidation, intermodal dynamics and competitive pressure

A proposed $85 billion merger between Union Pacific and Norfolk Southern to create a transcontinental east-west rail network could shift freight away from trucks. Analysis from T.D. Cowen suggests the deal might redirect as much as $1 billion of truck freight to rail, especially shorter-haul volumes around the Mississippi River that are currently trucked.

Intermodal transport—trailers or containers moved on flatcars—has been one of the more profitable niches for TL operators for decades. Routing long-haul freight (typically over about 1,200 miles) onto rail can free drivers to focus on short- and medium-haul runs, easing the driver shortage pressure to some extent.

The UP/NS proposal could also trigger further strategic moves among railroads, such as a potential Burlington Northern Santa Fe interest in CSX, illustrating how many interlinked outcomes hinge on rail consolidation. As UP CEO Jim Vena put it this summer on an earnings call, “If you stand still, you get left behind.”

Industry fallout and shifting revenue strategies

Slackening demand has already contributed to bankruptcies and business closures among dry-van carriers in various regions, as the weakest operators have felt the impact most acutely. In response, truckload executives are exploring alternative revenue streams to keep volume growing while the broader market recovers.

One increasingly prominent strategy is to deepen partnerships with logistics firms and shippers across the U.S.-Mexico-Canada supply chain. Near-shoring of manufacturing to Mexico, coupled with new distribution centers and logistics hubs, could generate sustained truckload demand—particularly for cross-border services.

Cross-border investment trends and executive perspectives

Werner Enterprises CEO Derek Leathers has pointed to rising foreign direct investment (FDI) in Mexico as a potential upside for cross-border truckload volumes. According to Mexican government data, Mexico attracted more than $55 billion in FDI during the first half of the year, a record pace.

Leathers noted at the Deutsche Bank 2025 Transportation Conference that over $25 billion of that inflow—nearly half—came from the United States and Canada, highlighting the regional nature of manufacturing and logistics investment that could support future TL demand.

Outlook for shippers, rates and carrier earnings

Shippers need to track structural shifts in the truckload market and align operations to meet evolving service expectations. Analysts caution that sustaining rate increases will be difficult; most improvement in TL carrier earnings is expected to stem from internal efficiency gains rather than broad-based rate hikes to shippers.

Absent a clear change in trade policy or a rapid rebound in demand, the outlook into 2026 remains largely an extension of current conditions, with carriers adapting through incremental capacity additions, service diversification, and closer cross-border relationships.

Third-quarter IBI signals a demand inflection

Prologis’ latest Industrial Business Indicator (IBI) showed an inflection in demand during the third quarter, with the IBI Activity Index registering 53. The report attributes this turning point to improvements in net absorption, new lease signings and the proposal pipeline, all of which were healthier in Q3 than the 2024 average.

The IBI also noted a prior decline tied to supply chain activity that peaked early in 2025 amid trade volatility, and described the recovery as nonlinear, driven initially by large firms and e-commerce companies before other sectors follow.

What the IBI measures

Prologis defines the Industrial Business Indicator as a survey capturing customer sentiment and behavior related to warehousing and logistics activity. The metric tracks trends such as leasing, absorption and the pipeline of potential deals to gauge market momentum.

Factors behind the uptick in leasing

Prologis’ Global Head of Research, Melinda McLaughlin, explained that several factors are contributing to stronger real estate demand compared with the 2024 average. Operators are looking past trade-related uncertainty, making structural supply chain investments as business activity grows.

Prologis recorded a quarterly record in leasing volume and an increase in build-to-suit agreements in Q3. Larger customers and essential industries led the activity, supported by modest rent corrections and fewer new deliveries that left availability and terms attractive to occupiers.

• Essential industries leading leasing activity
• Food and beverage
• E-commerce
• Healthcare

Utilization trends and capacity fill

Utilization of existing facilities rose through the third quarter, averaging about 84% and edging toward 85% in October as inventories moved through supply chains and occupiers used extra capacity. That higher utilization is being driven in part by customers expanding operations within their current footprints rather than by widespread new-site expansions.

Inventory approaches and upside risks

Customers continue to favor a "just enough" inventory approach, maintaining lower average utilization than would typically signal broad expansion. Prologis cautioned that an upside surprise in consumption could prompt a rapid and significant supply chain response if demand exceeds these conservative inventory positions.

Cyclical view on the current trend

McLaughlin characterized the recent improvement as more cyclical than structural. Companies are keeping inventories tight because economic uncertainty and holding costs remain elevated. As the cycle shifts toward expansion, Prologis expects some rebuilding of inventory buffers, particularly given persistent supply chain disruptions that encourage keeping more stock on hand.

Vacancy, construction pipeline and near-term outlook

The report projects vacancy holding around the mid-7% range in the near term, reflecting a stabilizing market. Prologis also noted that the construction pipeline is contracting: new development starts are running below the 2017–2019 average and speculative construction has slowed sharply.

McLaughlin said recent deliveries should continue to lease up and keep vacancy steady for now, but the rapid tightening of the development pipeline means the market could firm again once current supply is absorbed—especially for modern, well-located facilities. With replacement costs still elevated, rent growth has the potential to accelerate as demand improves and new space becomes scarcer.

October LMI shows continued expansion

The Logistics Managers Index (LMI) registered a reading of 57.4 in October, indicating that logistics-sector growth persisted. That mark matched September’s reading and represents the eighth consecutive month the index has remained below its long-term overall average of 61.4. A reading above 50 is interpreted as growth.

Who produces the monthly LMI

The monthly LMI is produced through a collaborative research effort involving scholars from Arizona State University, Colorado State University, the University of Nevada, Reno, Florida Atlantic University, and Rutgers University. The project also receives support from the Council of Supply Management Professionals (CSCMP). The most recent edition of the LMI is authored by Zac Rogers, Ph.D., Steven Carnovale, Ph.D., Shen Yeniyurt, Ph.D., Ron Lembke, Ph.D., and Dale Rogers, Ph.D.

Components included in the index

The LMI reading is calculated from eight distinct logistics components. The report identifies these components as

• Inventory levels
• Inventory costs
• Warehousing capacity
• Warehousing utilization
• Warehousing prices
• Transportation capacity
• Transportation utilization
• Transportation prices

October sub-index movements and specific figures

The authors explain the overall stability in the index reflects offsetting forces: declines in inventory and warehousing metrics were balanced by gains in transportation measures. In October, Inventory Levels shifted by -5.6 and moved into contraction at a reading of 49.5. Early in the month Inventory Levels contracted at a robust rate of 39.1, which the report interprets as evidence that previously large stocks of goods were being drawn down.

Historical comparison and the 2018 pattern

The report compares current dynamics to trends seen in the fall of 2018, when upstream B2B freight slowed in response to U.S. tariffs on Chinese imports while B2C movements stayed firm thanks to strong U.S. consumer spending. That downstream strength supported freight-market growth through the end of 2018, although a slowdown followed in early 2019 after holiday spending tapered off. The authors note it will be interesting to observe whether similar dynamics play out in 2026.

Outlook for transportation and holiday season effects

Based on October readings, the report suggests transportation markets—particularly downstream segments—are likely to remain robust at least through 2025. Taken together, the data imply inventories are falling as holiday shopping begins, which eases prior warehousing tightness and increases the utilization of transportation as goods move to consumers. In short, supply chains appear to be shifting from a relatively static, inventory-weighted state to a more active, seasonally normal flow.

Inventory timing since the pandemic and signs of normalization

The authors contrast this year with other post-pandemic seasons, when inventories tended to peak in mid-October and then decline progressively through holiday consumer spending. This year, inventories were pulled forward earlier to avoid tariffs and peaked sooner than usual. The October readings indicate a degree of reversion toward normal timing, with inventory being moved toward retail consumers and significant drawdown of large stockpiles.