Freight's 42-Month Slump Ends, and Diesel Is Sending the Bill

The longest freight recession on record is over. Cass Information Systems reported on September 14 that its shipments index rose 2.1 percent year over year in August, the first annual increase since January 2023 and the end of a 42-month decline, the longest in the dataset's history. The timing is uncomfortable for shippers, because the recovery in volumes arrives at the same moment diesel is repricing the cost of moving every one of those shipments.

The expenditures index tells the cost side of the story. Total freight spend, which includes fuel, jumped 18.7 percent year over year in August to 3.72, accelerating from a 9.1 percent gain in July. Cass attributes roughly a full point of the month-over-month increase to higher overall rates, and its report credits diesel with much of the rest. Per Cass, diesel was up 46 percent year over year and 10 percent sequentially when the August report was compiled, and the government's own weekly survey has moved further since. The EIA put on-highway diesel at $5.967 a gallon for the week of September 7, $2.201 above the year-ago price, Diesel at $6.31: AAA All-Time Record Hits the Household Bill EIA updates the series again on September 22.

Contract rates are doing the durable damage

Spot rates get the headlines, but the Cass Truckload Linehaul Index, which measures linehaul rates excluding fuel and accessorials across both spot and contract business, is where a shipper's budget year actually gets set. It reached 153.9 in August, up 0.7 percent from July and 11.3 percent year over year. That is the 20th consecutive annual increase and the largest since June 2022. Cass's own commentary notes that even where spot rates have paused with modest sequential declines, the much larger contract market is adjusting higher. Contract renewals lag the spot market by months, which means the linehaul index will keep climbing into early 2027 even if spot softens.

The demand side deserves honest treatment, and Cass provides it. The report explicitly hesitates to call August a major improvement in freight demand, since the 5.6 percent monthly gain essentially reverses declines in June and July. The explanation it offers is restocking: Golden Week Blank Sailings Hit 11% as Transpacific Spot Rates Top $10,000, tariff refunds under the IEEPA ruling flowing back to importers, and shippers with extra wherewithal to rebuild inventories. Corporate profit margins hit record highs in the second quarter, per ACT Research, which is why a soft job market has not yet dented goods spending. If normal seasonal patterns hold, Cass expects September shipments up about 1 percent year over year. That is growth, but modest growth.

Supply-side factors are doing quiet work here too. ACT Research notes Class 8 tractor sales rose above replacement levels in July and August, letting fleets expand for the first time after 18 months of tightening. New regulatory enforcement and broker liability law have raised barriers to entry, limiting how quickly capacity can chase the rate recovery. Capacity that cannot re-enter is capacity that cannot bid rates down. This is the mechanism behind a truckload linehaul index rising 11.3 percent in a year when freight demand was, until August, still shrinking.

Equity markets have been pricing the turn. Old Dominion Freight Line closed at $174.62 on September 21, J.B. Hunt at $236.17, and C.H. Robinson at $152.84, per Yahoo Finance quotes. The read-through is straightforward: carriers with contract exposure reprice first, brokers capture margin as the spread between soft spot and rising contract rates narrows, and fuel surcharges pass diesel straight through to shippers with a lag of one to two weeks.

For the diesel pass-through itself, the driver sits outside trucking entirely. Tanker Rates Top $1.2 Million a Day as War Risk Compounds traced how war-risk premiums and rerouted product flows have pushed refinery and distillate economics hard, and US retail diesel has followed. At EIA's national averages, a trucking company burning roughly 900 gallons a week paid about $3,480 for that fuel two years ago, when the price was near $3.87. The same week of work now costs about $5,660, a 63 percent increase, which is why freight expenditures are rising nearly nine times faster than shipments.

Three dated markers tell you whether this inflection holds. First, EIA's diesel print for the week of September 21, due September 22, shows whether the fuel leg is still accelerating. Second, Cass's September report, due mid-October, tests the 1 percent seasonal forecast against actuals; a miss there would say restocking, not recovery, was doing the work. Third, the next round of carrier updates from ArcBest, XPO and their peers in October shows whether August tonnage acceleration carried through. If all three confirm, the goods economy enters 2027 with rising freight rates and diesel still feeding them, and that combination lands in consumer prices with a lag shippers can already compute.

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