US factories speed up as truck capacity keeps shrinking
More freight, fewer trucks: October shows US shippers paying more to move goods inland
US factories had their strongest month for output in almost five years in October. The Institute for Supply Management (ISM) said on 2 November that its production index rose to 59.0 from 56.7, the highest reading since November 2021. Its headline Manufacturing PMI rose to 55.5 from 54.5. A PMI, or purchasing managers’ index, is a survey of factory buyers. Any reading above 50 means activity is growing. This was the 10th straight month of growth.
On the same day, DAT Freight & Analytics said truck capacity tightened again. In the week ending 31 October there were 10.93 loads posted on its board for every truck posted. A year ago the figure was 6.37.
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Our view is simple. US freight demand is rising at a time when the trucking industry has fewer trucks on offer than a year ago. When those two things happen together, prices go up. That rise is already visible in spot rates, and we think it will reach contract rates next. Forwarders who move containers inland from US ports should plan for that now, not in January.
Diesel is already high. Inland costs were rising before this report. October adds demand on top.
What the factory survey says
The ISM report is more than a headline number. Several parts of it matter to anyone moving freight.
Production rose to 59.0. New orders edged up to 55.5 from 55.3. Backlog of orders, which is work already ordered but not yet made, slipped to 54.6 from 56.4. It is still growing, just more slowly.
Imports are the key line for forwarders. ISM’s imports index rose to 52.9 from 51.0, the ninth straight month of growth. Factories are buying more from abroad, and buying it faster than in September. New export orders rose to 51.2 from 50.9.
Inventories moved back into growth at 51.4, up from 48.6 in September. Factories are building stock again. Meanwhile, ISM’s customers’ inventories index held at 41.6. A reading that low means factory buyers think their own customers’ shelves are too thin. ISM has said customers’ inventories were “too low” for 25 months in a row. That usually points to more restocking ahead, which means more freight.
Supplier deliveries were 59.1, up from 59.0. In this index a higher number means slower deliveries. It has now shown slower deliveries for 11 straight months. Slow deliveries often go with rising demand. They also mean supply chains have little slack.
Prices are still high but rising a little more slowly. The prices index fell to 75.2 from 77.9. ISM put the increases down partly to steel and aluminium costs and tariffs. It also pointed to “increases in petroleum-based products as a result of the Middle East conflict.”
ISM chair Susan Spence said the mood among buyers got worse even as activity improved. Only 34% of comments were positive. Of the negative comments, ISM said “pricing volatility was mentioned in 62 percent, longer lead times 41 percent, tariffs 25 percent.” The Iran war came up in 21%.
Freight shows up directly in the survey. On ISM’s list of commodities rising in price, freight has been up for eight months in a row. Fuel has also been up for eight months, and diesel for three.
Two buyers spoke about trucking. A food, beverage and tobacco respondent said: “Diesel rates and the trucker shortage are impacting costs beyond the raw material inputs.” A transportation equipment respondent said “elevated diesel prices continue to support trucking company revenues through fuel surcharges, even as freight volumes remain challenged.”
Bloomberg’s Jeffrey Sparshott, writing in Transport Topics, noted the headline beat all but one forecast in Bloomberg’s survey of economists. He added that factory head count has risen for four months in a row, the longest stretch since early 2022.
What the truck market says
DAT’s dry van report covers the week ending 31 October. A dry van is a standard enclosed trailer, the type used for most retail and import freight.
The average spot linehaul rate paid to carriers rose 3 cents, or 1.3%, to $2.23 a mile. That excludes fuel. Linehaul is the base charge for moving the trailer. Fuel surcharges are added on top. DAT wrote: “Rates climbed 32.6%, or $0.55 per mile, year over year”. The rate is 42 cents above DAT’s nine-year seasonal average of $1.81.
The load-to-truck ratio tells the bigger story. It rose to 10.93 from 9.51 two weeks earlier. DAT said load posts rose 8.4% in the week while truck posts fell 5.7%. Compared with a year ago, load posts are up 26.8% and truck posts are down 26.1%.
That is the core of our argument. Freight is up a quarter. Trucks are down a quarter.
The rise is not even across the country. DAT’s bellwether states, a group of 10 that account for 35.6% of national dry van outbound volume, averaged $2.91 a mile. That was down 4 cents on the week but up 35.5% on a year ago. California was the only one of DAT’s top 10 origin regions where rates rose in the week, by 4 cents to $2.62. That matters for anyone pulling imports out of Los Angeles and Long Beach.
DAT’s own 35-day forecast puts the van spot rate at $2.26 a mile, in a range of $2.19 to $2.33. It expects retail and e-commerce restocking for Black Friday and Cyber Monday to keep trailer demand strong into early December.
Then there is fuel. The US Energy Information Administration (EIA) put the average on-highway diesel price at $6.352 a gallon for the week of 26 October. That is up 7.6 cents on the week and about $2.63 more than a year earlier. The next EIA figure comes out on 3 November.
Why capacity is still falling
Truck supply has been shrinking all year. In June, Transport Topics asked analysts why. FTR’s Avery Vise saw carriers recovering higher fuel costs, amid the war with Iran, as the main driver of spot rates from early March to mid-May. Among the earlier factors behind the late-2025 turn, he cited “stricter enforcement regarding foreign drivers”. Baird’s Dan Moore described “a supply-driven inflection in rates, which has never happened before.”
At the time, Vise expected a seasonal lull and then firming around Labor Day. Rates have stayed high since. DAT’s figures show van spot rates 32.6% above a year ago at the end of October, with the load-to-truck ratio still climbing.
Alex Fuller of Traffix told Transport Topics in June: “This is the new baseline we’re at.” He expected the upcycle to continue at least through the end of 2026, possibly another year or more. October’s data backs that view.
In June, FTR data put 2026 contract rates about 8% above 2025, with rates projected to rise sequentially through at least mid-2027. In our view, contract rates follow spot with a lag. When spot rates stay well above contract rates, carriers reject more contract loads, and shippers have to pay up at the next renewal.
What this means for forwarders
The import picture and the truck picture now point the same way. ISM’s imports index is rising, inventories are being rebuilt, and customers’ shelves are still thin. Each of those means more containers arriving at US ports and needing a truck to move them inland.
Here is what we think forwarders should do.
Expect drayage and transload costs to rise through the peak. Drayage is the short truck move from port to a nearby warehouse or rail yard. Transload is moving goods out of a sea container into a domestic trailer. Both depend on the same drivers and trailers DAT is tracking.
Keep inland quote validity short. With spot rates rising and diesel above $6, a 30-day inland quote carries real risk. Quote fuel as a separate line that moves with the EIA index, so you are not absorbing it.
Watch California origins. DAT’s California van rate is up 77 cents a mile on a year ago and rose last week while most regions fell. Shippers moving imports out of Southern California will feel it first.
Talk to shippers about 2027 contracts now. Many US shippers run truckload bids in the first quarter. If base rates jump at renewal, landed-cost budgets built on 2026 inland rates will be wrong.
Watch the factory survey’s import line. If ISM imports stay above 50 in November, ocean volumes into the US should hold up through the winter. That would add more pressure on inland capacity just as carriers start pricing next year.
Our call
This is our prediction. By the end of Q4 2026, US truckload carriers will hold fuel surcharges firm and open first-half 2027 contract renewals asking for at least 10% more on base linehaul rates, before fuel. October’s numbers make that more likely, not less. Demand is rising, trucks are scarcer, and DAT’s spot rate is still about a third above a year ago.
We also expect the EIA weekly on-highway diesel average to stay above $6 a gallon through the end of November. It was $6.352 on 26 October and rising.
If both hold, inland trucking will cost US importers more in early 2027 than it does today, even before fuel.
Sources
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