Article Summary
Why Are Freight Costs Rising?
- Fuel-driven inflation: Energy costs pushed U.S. inflation to a two-year high of 4.2% in May, forcing consumers to redirect their spending toward essentials like gasoline and away from discretionary goods that drive freight volume.
- Record-high shipping costs: Despite low consumer demand, truckload transportation prices hit an all-time high in May, with tight capacity and strict regulatory enforcement expected to keep rates elevated.
- Carrier downsizing: Major parcel carriers are shrinking their networks to boost revenue per package, with UPS closing 50 facilities in 2026 and FedEx consolidating operations through its Network 2.0 initiative.
- Rising warehouse and port pressures: Warehousing holding costs surged to their highest levels since 2022 despite flat inventory volumes, while ocean import volumes began returning to seasonal trends amid sharp monthly gains in Chinese imports.
Fuel and energy costs are driving up supply chain and inventory prices across the country, according to a report released Friday by third-party logistics provider ITS Logistics.
The June Supply Chain Report from ITS Logistics, an Echo Global Logistics company, shows that energy-driven inflation is reshaping consumer spending and squeezing shippers just before the peak freight season, even as overall consumer demand remains low.
U.S. inflation rose to 4.2% year-over-year in May, marking its highest level in more than two years. Core inflation—which excludes volatile food and energy costs—rose only 0.2% month-over-month and 2.9% year-over-year. Analysts say the gap highlights how heavily fuel prices are pressuring the economy.
According to the Conference Board, the Consumer Confidence Index fell in May for the first time in four months, driven by sustained high prices and geopolitical conflict in the Middle East. Consumers are increasingly prioritizing essentials. Retail gasoline station sales climbed 26.5% year-over-year, leaving less household budget for the discretionary retail items that typically generate shipping volume.
"Despite objectively low demand, shippers are paying materially more to move freight — and they should not expect that trend to reverse any time soon," Josh Allen, chief commercial officer at ITS Logistics, said in a statement.
Transportation costs are hitting record numbers. The Logistics Managers’ Index transportation prices reading reached 96.0 in May, the highest on record. Rates for dry van and refrigerated capacity stayed well above the five-year average, while equipment posts and load-to-truck ratios indicated tight capacity. Though rates dipped slightly after the Commercial Vehicle Safety Alliance's annual Roadcheck Week inspection event, ITS analysts expect state and federal regulatory enforcement to continue thinning carrier capacity and pushing prices higher.
The parcel and final-mile delivery sectors are facing similar pressures as major carriers adjust operations. UPS has closed 23 facilities this year with 27 more closures planned, while FedEx is consolidating its network through its Network 2.0 initiative. Both carriers are aiming to increase revenue per package while shrinking their footprints.
Warehousing costs are also climbing independent of inventory volume. The index for inventory costs jumped 9.4 points in May to 84.1, its highest level since mid-2022, even though overall inventory volumes remained flat.
“Shippers relying on single-carrier strategies or static network designs are bearing the full impact of both carrier restructuring and tightening freight conditions,” said Jeff Lolli, vice president of solutions engineering and small parcel at ITS Logistics. Lolli noted that tactics like multi-carrier strategies and zone skipping are now baselines for cost control rather than advanced optimization tools.
Containerized import volumes at domestic ports returned to traditional seasonal trends following early shipping spikes last year. May imports totaled 2,428,758 twenty-foot equivalent units, a 6.6% increase from April, according to Descartes Systems Group data. Imports from China surged 19.9% month-over-month and 28.1% year-over-year, though the report warns that renewed trade tensions could slow future growth.
