The broad risk landscape when it comes to factors influencing big decision-making at trucking companies large and small is always pretty tough to pin down. But with war in Iran, an administration with a particular focus on dominating the news cycle, and the big shift to annual renegotiation of the trade agreement with the nation’s biggest trading partners (the USMCA), it’s getting tougher.
About the latter, “that seems like a bad risk environment” in which “to plan and understand your sourcing, and what it means for demand,” said FTR Transportation Intelligence CEO Jonathan Starks, speaking from the stage Monday at the annual FTR conference in Indianapolis.
The latest U.S.-Canada spat in particular — invocations of “Lake America” from the stage didn’t draw much more than a chortle somewhere way back in the hall late in the day — illustrates the point.
Yet the analysts/economic forecasters at FTR nonetheless tried, presenting assessments of several key elements of risk, including the headline one: Is a bona fide diesel shortage looming with increased demand for winter heating oil? U.S. stocks are as low as they’ve been in years, and export demand continues high with the war ongoing.
Other risk in analysts’ outlook:
- Widespread inflation means borrowing costs will continue to limit housing markets, where tepid/flat starts have been the story for years now.
- Manufacturing production indices/favorability measures are improved: Durable goods outputs are up 4%, yet also include high-tech sector production, where improvements in processing speeds, for instance, are counted as positive outputs. Remove those and output’s up 0.4%.
- Retail spending indices, similarly, look positive for durable goods orders, but a large amount of it is digital, not-so-much-freight-producing categories like high-tech.
Despite the headwinds, better performance in gross domestic product for goods transport this year so far yields a fairly stable forecast from FTR analysts that’s positive going into the coming year and a half.
The AI-construction boom is part of it — and there are risks there, too, of the boom-bust variety. Yet Starks felt overall output could, with any luck, “really turbocharge into the next year,” he said.
Top risks:
1. Energy: Actual diesel supply crunch in next six months?
FTR Trucking VP Avery Vise put it in no uncertain terms. With the Strait of Hormuz (or, perhaps: Strait of America now?) mostly not navigable and conflict continuing, U.S. exports of diesel fuel “are way up” with demand from various parts of the world that relied in some measure on Iranian and other Middle East oil, he noted.
U.S. inventories of distillate fuel oil, from which diesel is produced, meanwhile, are lower than their lowest point in 2022.
You might recall the headlines warning of extremely low inventories that year, as well as some spot shortages in a variety of locations the prior year. Note too that 2026 inventories continue down in the chart at a time of the year when, in most others, they usually build back up heading into fall/winter.
Winter heating oil is produced from the same distillate base stock as diesel — as seasonal demand for it increases into the next seasons, Vise said, “it’s concerning that we could have a crisis in the next six months, just based on fuel alone.”
2. Inflation — plenty in energy, of course, but most everything else, too
Starks noted the long-term impact if a status quo for diesel pricing emerges from recent history levels — Vise showed such a scenario, with costs continuing 25.1% higher than pre-war levels.
Yet it’s not energy alone where inflation is clearly visible. “Over the last year we’ve clearly turned in the wrong direction,” Starks said. Goods pricing indices have turned up this year in particular. “It’s permeating in a lot of areas” outside energy.
Starks noted the Aluminum producer price index hitting 50% higher year-over-year levels in recent months as an extreme example.
FTR CEO Jonathan Starks (left) and Trucking VP Avery Vise this week in Indianapolis.
3. Housing and construction — growth indices flat
“Housing is stuck, not really moving,” Vise said, with new home sales fairly level for three years, new-housing-starts measures similar. Neither are “creating real growth in the marketplace,” with higher mortgage rates a constraint.
Mortgage rates “came down below 6% at the end of February for one week,” Vise said. “We attacked Iran, and we haven’t been below that” since. Had the war not begun, he said, the Federal Reserve may have been more likely to cut interest rates later on. Yet resulting inflation made that less and less likely over time.
“There was that opportunity to see something move in housing,” Vise added, “and it got essentially taken away.”
Don’t expect a big upside there.
On the nonresidential side of construction, “we’re seeing strength in offices,” all related to AI data centers, generally, he said, amid that very real boom.
Don’t count on the AI boom long-term
“If I had a nickel for every time I’ve heard data center I could probably retire quite soon,” Vise said, showing conference attendees the growth in that office category of non-residential construction where such centers show up in the data. “It’s producing a lot of freight for flatbeds right now.”
Illustrating how truckers have reacted, in part, FTR Senior Commercial Vehicles Analyst Dan Moyer pointed to strong +20% order performance comparing the current September to August order cycle to the prior year for flatbed trailers.
Reefers are benefiting from the AI boom, too, by smaller measure. Vise has heard reports of pharmaceutical providers having difficulty sourcing refrigerated transport as “some of the components in data centers are moving in reefers because they’re sensitive” to big temperature swings.
In so many ways seen in the data, and all the anecdotes, Vise said, “you essentially have an economy, looking through the sectors, where growth is being delivered by investment in AI,” mostly.
The longer it goes on, said Starks, the “ability to get growth becomes riskier and riskier.” Free cash flow at the big “hyperscalers continues to come down,” limiting investment potential.
In order to accelerate growth, investment must get bigger and bigger and bigger as time goes on. “That will just get much more difficult,” Starks said.
In other words, it won’t last forever.
The burgeoning NIMBY (“not in my backyard”) local movements against data centers Vise suggested as a positive in this case, potentially slowing the hyperscalers down enough that the “growth rate is sustainable,” he said. “A shallower, longer build-up could be to the benefit of freight” for a longer term, avoiding boom-bust fallout.
Despite his optimism about stability/growth showing in FTR’s freight forecasts, doing business in the U.S. these days remains a matter of riding the rollercoaster, Starks said.
“Last year we had the tariff rollercoaster,” he said. “It slowed the broader economic growth. We’re still in a rollercoaster environment — and I don’t see that changing. Mid-terms are coming up,” and the “administration thrives on this chaotic environment. It continues to put a bit of a lid on the investment environment to really grow and accelerate.”
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