The economy has “muddled through reasonably well,” according to economist Bill Witte.
Similar to the previous forecast in November, there’s lots of uncertainty on the horizon, with the next half of the year looking tougher, but not as disastrous.
Looking at the recent gross domestic product, Witte, during FTR’s recent State of Freight webinar, said growth in the last quarter of 2025 was weak at 0.5%, largely due to a government shutdown. The first quarter of 2026 came in at roughly 2%, slightly below expectations because of a “big swing in imports and trade balance.”
Consumption was the largest contributor to growth but softened modestly. FTR Chairman Eric Starks said it slipped below the healthy 2-4% target range, adding, “The big risk right now continues to be oil and inflation… we’re going to have to really keep an eye and see if the consumer can continue to keep buying."
Investment was the standout as it remained strong in both quarters, partly driven by data center construction and AI growth.
“I’m a little bit more optimistic now than I was then [in November], or depending on your viewpoint, I’m less pessimistic,” Witte said, as he forecasts a growth rate of about 2%, which would come from increases in the labor supply and productivity.
Witte forecast roughly 72,000 new jobs per month through early 2027, an improvement from his November forecast of 38,000 jobs per month. However, he pointed out that immigration-driven labor supply growth has slowed sharply. Unemployment is expected to stay around 4%.
What does it mean for the freight sector?
According to FTR’s GDP Goods Transport Sector, which adds imported goods movement and removes services that don’t add to freight, Q1 came in stronger than expected.
But Starks said that the momentum behind it reflects supply tightening more than genuine demand recovery.
“Part of the thing that we were seeing is that there is not a demand recovery,” he explained. “What we’re seeing more is a supply side recovery, where we’re seeing things starting to tighten, because supply is not available specifically when we talk about transportation.”
Manufacturing showed slight growth, though is still below pre-COVID levels and isn’t driving a substantial amount of freight, Starks said. The housing market continues to struggle in existing home sales, despite lower mortgage rates.
An area FTR continues to see growth, even amid inflationary pressure, is the surge in imports of computer-related and electronics orders. Driven by data center construction that started in 2023, Starks said it has been on a steady, upward trajectory.
Looming uncertainties
The biggest near-term risk to the entire economic picture is the market reaction of the Iran war and its impact on oil and diesel prices, the analysts noted.
Starks pointed out it’s particularly hard on cash-constrained smaller carriers who pay up front and recover later. “Will it come down eventually? It will come down, but the question is, when?”
The analysts also discussed the cost-side implications of the Supreme Court’s ruling that freight brokers are not exempted from state-level personal injury lawsuits.
Insurance and vetting would be impacted, Starks noted. “Insurance clearly goes up, because when you start talking about risk mitigation (rates go up)." Adding to the tally, Starks said, is the cost to vet "and make sure that the carriers that you’re using are meeting different standards.”
The United-States-Mexico-Canada Agreement renegotiation, in which the three nations must convene by July 1, is another major risk.
From the fuel pricing issues to the USMCA, the timing could create a crisis dynamic with no breathing room in between, Starks said.
“If, for example, this starts to dissipate, and the pricing for fuel starts to ease back in the second half of this year, my concern is that we still have USMCA on the docket… You basically go from one crisis to another crisis, and then inflationary pressure continues.”
Starks added that the USMCA risk is one to watch as a lot of AI-driven goods, especially computer electronics, flow through Mexico and Asia.
