2025 Transportation Outlook – Q2 Update

Truckload Spot & Contract Rate Forecast

What is the Beon™ Band?

The Beon™ Band rolls up Year-over-Year quarterly averages of spot and contract freight data creating projections for future freight cycles. This Band is the outcome of the relationship between freight supply and freight demand, with freight demand being driven by the macroeconomic demand indicators. When we overlay the Beon™ Band with the demand curve in a single chart, we can see demand’s influence on the to-the-truck costs.

TL Spot & Contract Cost Curve: %YoY Change by Quarter

_{Source: Beon Band – Transportation Insight Holdings}

Beon Band vs Economic Demand Indicators: % YoY Change by Quarter

When the Beon™ Band is overlayed with the macroeconomic indicators of freight demand, we can understand how some of these factors impact freight rates and thereby forecast where we see the market going over the next couple of quarters.

Freight Rate Forecast

Spot Freight

• Linehaul spot rates concluded Q1 2025 with a 3.0% YoY increase, showing sustained inflationary pressure in the truckload market. Looking ahead to 4Q25, we anticipate acceleration with spot rates potentially rising as much as 17.5% YoY. Tender rejections are expected to trend upward alongside tightening capacity (6-8% is better than the 5% we have today). However, it remains unclear whether these inflationary pressures will trigger a large tender rejection cascade (above 10%).

Contract Freight

• The Cass Truckload Linehaul Index, a benchmark for contract linehaul rates, decreased 0.5% Month-over-Month in April 2025. YoY growth decelerated to 0.9% in April, down from 1.5% in March, as momentum in the truckload market softened. Despite pre-tariff shipping activity, volume was insufficient to meaningfully tighten capacity during what is typically a seasonally weak month, resulting in a pause in rate acceleration. In addition to the modest April gain, Q1 2025 registered a 1.4% YoY increase, confirming that contract rates have entered an inflationary phase. Looking forward, we anticipate contract rates recovering and rising approximately 4.0% YoY by 4Q25, supported by tightening capacity and continued upward pressure on operating costs.

"Spot rates are relatively flat at the moment, but we expect seasonality to kick in as capacity tightens and demand gradually shifts. While tariff-driven container flow is rising, it hasn’t yet translated into meaningful truckload or LTL volume. Overall demand remains soft, and contract rates are seeing only modest gains. There’s also potential for a summer pull forward, as shippers look to move inventory earlier to avoid future cost pressures—potentially softening the traditional holiday peak. For shippers, now is the time to align procurement strategies, hold contract carriers accountable, and stay flexible with routing and mode decisions ahead of potential volatility later in the year."

Port to Porch Market Forecast

Drayage Shipping

Following the 90 day tariff reprieve announced on May 13th, West Coast import volumes are set to surge as Chinese exporters race to beat the new 30% duty clock. Carriers are reactivating capacity, and steamship lines have already signaled for larger ships on the Trans-Pac. The Port of Los Angeles entered May with 20% of imports idling nine days or more and Long Beach’s local import dwell sits at 48 days, levels that historically precede chassis shortages. As demand pulls into June and July, shippers that prebook dray capacity and pivot to immediate transload will dodge the worst of the 2025 port crunch.

Less-Than-Truckload Freight (LTL)

LTL volumes remain soft, and rates are climbing. Incumbent carriers are successfully implementing general rate increases (GRIs), while non-incumbents are aggressively targeting market share. For shippers, this presents a timely opportunity to reevaluate carrier strategy by shifting lanes and rebalancing networks that drive cost efficiency and improve alignment with core partners.

M&A activity is intensifying across regional LTL carriers; several players are actively exploring acquisitions that enhance network density and coverage. Meanwhile, FedEx’s planned spin-off of its FedEx Freight division is progressing, new separate sales channels are taking shape. Shippers should prepare for rep transitions and potential structural changes ahead of the 2026 spin-off completion.

Lastly, the NMFTA’s reclassification overhaul, taking effect July 19, 2025, is increasing interest in dimensioning technology. As thousands of items shift to density-based classification, proactive investment in measurement solutions is critical to minimizing cost exposure and classification disputes.

Parcel Shipping

Parcel carriers are doubling down on efficiency in 2Q25. UPS, FedEx, and USPS are consolidating facilities and reducing headcount in efforts to cut costs while promising minimal customer disruption. However, USPS service degradation in rural regions suggests a widening performance gap. FedEx is pushing growth through expanded services, now reaching nearly two-thirds of U.S. households on Sundays. Its new “FedEx Easy Returns” program, powered by Blue Yonder, positions the carrier competitively in the fast-growing returns segment. USPS is set to launch “Next Day Priority”, a retail-focused overnight service covering 87% of the U.S., a direct move to capture more B2C market share. As of May 5, fuel surcharges remain elevated: UPS Ground at 18.0% and FedEx Ground at 17.75%, maintaining upward pressure on rates.

Core Macroeconomic Metrics

GDP, Consumer Spending, Inflation & Interest Rates

In the 1Q25, the U.S. economy contracted by an annualized rate of 0.3%, marking the first decline since early 2022. This downturn was primarily driven by a significant surge in imports ahead of anticipated tariffs, which widened the trade deficit and offset gains in consumer spending and business investment.

Consumer spending increased by 1.8% during the quarter, a deceleration from previous periods, as households faced persistent inflation and higher borrowing costs. Inflationary pressures remained elevated, with the Personal Consumption Expenditures (PCE) price index rising by 3.6% year-over-year, and the core PCE index, excluding food and energy, increasing by 3.5%.

In response to these economic conditions, the Federal Reserve maintained its benchmark interest rate within the 4.25% to 4.50% range, adopting a cautious approach amid concerns about balancing inflation control with slowing growth.

Consumer Confidence and Purchasing Power

In April 2025, U.S. consumer confidence declined for the fifth consecutive month. The Conference Board's Consumer Confidence Index dropped by 7.9 points to 86.0, the lowest level since May 2020. The Expectations Index, which gauges consumers' short-term outlook for income, business and labor market conditions, fell sharply by 12.5 points to 54.4. This marked its lowest reading since October 2011, falling well below the recession threshold of 80.

This downturn reflects growing pessimism among consumers about future business conditions, employment prospects and income expectations. Notably, 32.1% of respondents anticipate fewer jobs in the next six months, a level nearing that of April 2009 during the Great Recession. Additionally, expectations regarding future income turned negative for the first time in five years, indicating that concerns about the broader economy are increasingly affecting personal financial outlooks.

The decline in confidence was widespread across various ages and income groups, with the most significant drops observed among individuals aged 35 to 55 and those in households earning over $125,000 annually.

Diesel & Fuel Prices

As of May, the U.S. average on-highway diesel price stands at $3.476 per gallon, marking a $0.372 decrease compared to the same period last year. This downward trend reflects a confluence of factors, including increased global refining capacity and moderated demand. Notably, OPEC+'s recent decision to incrementally raise oil production by 411,000 barrels per day starting in June 2025 introduces potential volatility and additional supply.

Personal Income & Real PCE

In March 2025, U.S. personal income rose by 0.5%, driven by increases in wages and proprietors' income, particularly within service-producing industries and agriculture. Disposable personal income (DPI) also grew by 0.5%, while personal consumption expenditures (PCE) increased by 0.7%, reflecting higher spending on both goods and services.

The PCE price index remained flat MoM, indicating stable inflation. YoY, the PCE price index increased by 2.3%, and the core PCE index, which excludes food and energy, rose by 2.6%.

The personal saving rate declined to 3.9% in March, down from 4.6% in February, suggesting that consumers are allocating a larger portion of their income to spending.

Industrial Production & Manufacturing Output

In April 2025, U.S. industrial production remained flat, signaling a pause in the sector's growth trajectory. Manufacturing output declined by 0.4%, primarily due to a 1.9% drop in motor vehicle and parts production, reflecting the impact of ongoing tariff pressures. Utilities output provided a counterbalance with a 3.3% increase, while mining output edged down by 0.3%. Capacity utilization dipped slightly to 77.7%, remaining below the long-term average, indicating underused industrial resources.

Imports & Exports

Imports: In April 2025, U.S. Customs Maritime Import TEUs totaled 90,108, continuing the gradual recovery that began in late 2024. While slightly above the rolling average of 86,773 TEUs, volumes remain within a historically stable range, reflecting cautious inventory management amid economic uncertainty. However, with the recently announced 90-day tariff pause on Chinese imports, we could see a surge of inbound volumes as importers accelerate orders to capitalize on the temporary cost advantage.

Exports: The Outbound Ocean TEUs Index (OOTI) climbed to 889.17 in April 2025, one of the strongest readings over the past year and a continuation of the export recovery trend. This gain comes despite a 0.3% contraction in U.S. GDP in Q1 2025, driven by frontloaded imports and reduced government spending. The divergence suggests that U.S. exports are benefiting from stabilizing global demand and favorable trade dynamics, even as domestic economic activity cools.

Inventory to Sales Ratio

In March 2025 the overall inventories to sales ratio slipped to 1.34, down from 1.37 a year earlier, reflecting more sales and tighter stock management. Total business sales climbed 0.7 percent versus February and 4.5 percent YoY, while inventories inched up just 0.1 percent MoM and 2.5 percent annually. These numbers hint at stronger restocking activity ahead, translating into higher shipment volumes and fresh capacity planning considerations. Looking forward, we also expect inventory levels to tick higher in upcoming reports as businesses stock up in advance of tariff related cost pressures.