John Paul Hampstead
5 min read
Market analyst May Ling (@MarketswithMay) recently highlighted an intriguing trend in the trucking industry through her X (formerly Twitter) post, drawing attention to logistics as a significant component of the Producer Price Index (PPI). Her observations come at a pivotal time for the transportation sector, which has experienced dramatic fluctuations since the COVID-19 pandemic.
Specifically, Ling noted that within the PPI, logistics seems to be the first sector that cut capacity in response to soft demand, rather than raising prices to make up for smaller batches.
“Most producers DID NOT reduce capacity — instead, they raised prices to coincide with smaller batch sizes (mostly in goods, but also true in some services),” Ling wrote. “This is what was causing Inflation in many areas and should be deflationary once you get volume increases.”
The PPI is a critical economic indicator that measures the average change over time in selling prices received by domestic producers for their output. Unlike the Consumer Price Index (CPI), which tracks retail prices paid by consumers, PPI captures price changes from the seller’s perspective. As Ling emphasized in her tweet, “Unlike CPI, PPI is a leading indicator for inflation,” making it particularly valuable for forecasting broader economic trends before they affect consumer prices.
The U.S. truckload market has undergone significant transformation since the pandemic, characterized by extreme swings in capacity, demand and pricing. Following the COVID-19 freight boom, the industry found itself with excess capacity as demand normalized and consumer spending patterns shifted. This oversupply situation was further complicated by volatile trade policies and tariff rhetoric, creating uncertainty in import patterns.
As market conditions deteriorated, thousands of small and midsize trucking carriers faced unsustainable economics. According to research from freight brokerage RXO, “the average cost to operate a truck is 34% higher over the past decade but absolute spot rates are largely the same as they were in 2014.” This economic reality triggered widespread business failures and market exits, initiating a painful but necessary adjustment mechanism to rebalance the supply-demand equation.
