Economic Briefing
Second Half 2025 Outlook
The latest estimate of Q2 GDP growth shows that the economy may be growing at a 2.9% rate. This is much faster than expected and could set the stage for the second half of the year. Blue Chip economist estimates at the beginning of the second quarter called for 1% growth, they have since increased their estimates to 2%. And as mentioned, it looks as though actual growth could be exceeding that.
July is likely to bring in a wave of activity that may be stimulating the economy. The Federal budget deal may be controversial, but the provisions in it are generally aimed at boosting economic growth. Tax reductions and 100% depreciation benefits should help boost construction activity in the industrial sector and easing tax burdens on many consumer segments could help activate overall spending and consumption.
Trade deals, if nothing else, may help ease tariff concerns and at a minimum give purchasing managers a small modicum of certainty. Even if tariffs remain in place after a ‘deal’ is struck, a newly signed trade agreement will lock those rates in and help purchasing managers make longer term decisions on sourcing (even if the decision is to shift it to another market). In addition, if the UK trade agreement is any indication of the types of provisions in the remaining 17 “deals”, US export growth is likely to be a by-product.
Despite displeasure with the Federal Reserve, the Fed has built in two quarter-point cuts in the second half of the year into its forecast. If that occurs, that should help with big-ticket purchases (those using short-term debt instruments) like autos, home improvement projects, boats and RV’s, etc. The housing market is influenced more by the 10-Year Treasury, which has also been easing of late and can be pushed lower by rate cuts at the Federal Reserve. With housing accounting for up to 16% of US GDP, anything that stimulates the residential construction market can have a significant impact on the overall economy.
Questions About Peak Season Continue on Weaker New Orders Activity
There is still much uncertainty surrounding this year’s peak season and what order flow activity will look like. New orders reports from around the world show that export orders to the US are still weaker than normal seasonality. Some of this is due to early inbound activity that may have led to sufficient inventories for some products headed into the peak retail season.
Chinese manufacturers reported that new orders for exports were sluggish, and many would not be shipping in July. Given the typical timing for the US peak season, many retailers would have already had shipments ‘on water’ in July to meet pre-peak buying opportunities leading up to Black Friday. That could make inventories tighter in the traditional peak season and many products could run out of stock.
A similar notion is being discussed in manufacturing circles in the US. Large manufacturers with Tier 1, 2, and 3 suppliers are concerned that the less sophisticated supply chains in their value chain could face some stockouts that may shut down assembly lines. Tier 2 and 3 suppliers that have fewer resources and face difficulties in avoiding higher tariff markets are ordering conservatively and could be running inventories lean. Industries across automotive, construction (both residential and nonresidential), appliances, high-tech, and machinery face stockout risks later this fall.
The bottom line is that the peak season could be volatile and could carry a significant amount of uncertainty with it. Slower volumes earlier in this year’s peak may lead to scrambling and using expedited services later in the fall to fill stockouts of key merchandise (especially in mission-critical assembly lines and supply chains).
Oil Price Volatility Continued Through June, Likely to Ease in July
Oil prices (and subsequent gas and diesel prices) have been on a roller coaster ride through June largely because of Middle East tensions. Prices for West Texas Intermediate (WTI) Started the month at $60.79 and touched $75.14 on June 18th but have since cooled down and were trading at $65.64 at the time of writing. Oil prices are predicted to average $62.33 in 2025 ($61.81 in the last update). For 2026, the EIA has oil prices down sharply to $55.58 a barrel. Prices are expected to average $62.24 a barrel in Q2, $58.67 in Q3, and $57.00 in Q4.
Diesel prices as reported by the EIA show diesel prices averaging $3.52 ($3.49 in the last update) through 2025 (after averaging $3.76 in 2024). Current prices hit $3.72 on June 30th, elevated from where the EIA believes prices will be on average in Q3. Prices are expected to average $3.44 in Q3, and $3.48 in Q4.
With tensions easing between Iran and Israel for now and the flow of oil moving through the Strait of Hormuz, oil prices should theoretically continue to ease, which would pull refined fuel prices down with it.
Inside This Edition
Questions About Peak Season Continue on Weaker New Orders Activity
There is still much uncertainty surrounding this year’s peak season and what order flow activity will look like.
Oil Price Volatility Continued Through June, Likely to Ease in July
Oil prices (and subsequent gas and diesel prices) have been on a roller coaster ride through June largely because of Middle East tensions.
Trucking Trends Show Impact of Inbound Wave of Freight
For the past 90 days, supply chain managers have been trying to navigate tariff risk. Many had shipments pre-staged prior to April 2nd but they held those shipments from being sent to the US when reciprocal tariffs hit.
Maritime Rates Plunge on Weaker New Orders and Slow Opening of Suez Canal
Several sources are reporting on spot maritime rates and the sharp reduction in rates. The Drewry World Container Index has dropped 44% Y/Y and was down 9% in the last week of June W/W. Key lanes connecting the US to China were down sharply in the final week of June.
Transportation Briefing
Trucking Trends Show Impact of Inbound Wave of Freight
For the past 90 days, supply chain managers have been trying to navigate tariff risk. Many had shipments pre-staged prior to April 2nd but they held those shipments from being sent to the US when reciprocal tariffs hit. After the 90 day cooling off period, many supply chain managers released those shipments and had them sent inbound – and that is the current wave of freight being witnessed at US ports in late June and early July. Trucking data is showing some of this increase in freight volumes.
DAT Trendlines data showed that for the full month of June, loads looking for trucks were up 6.1% Y/Y while trucks looking for loads were down 22.4%. This gap led to a 22.7% increase in the load-to-truck-ratio Y/Y, but spot prices are still unmoved. There is still sufficient capacity and spot rates were just 0.5% higher. In fact, month-over-month, spot prices were unchanged.
Load-to-truck-ratios were at 6.7 loads for every available truck (the highest since January) through June 28th. For the full month of June, it came in at 5.79, up from 4.7 last year and 3.5 in 2023.
The big question is whether this trend will continue, or if it is a single point in time increase. Manufacturing new order activity could suggest that this wave of freight may stall (or slow down) after this initial wave. Maritime data would suggest that volumes are slowing, primarily because purchasing managers have decided to take a “wait and see” attitude toward tariffs and risk for the fall.
The Producer Price Indexes for trucking collected through May (latest available) showed TL up 3.1% Y/Y and LTL rising by 5.4% Y/Y.
Maritime Rates Plunge on Weaker New Orders and Slow Opening of Suez Canal
Several sources are reporting on spot maritime rates and the sharp reduction in rates. The Drewry World Container Index has dropped 44% Y/Y and was down 9% in the last week of June W/W. Key lanes connecting the US to China were down sharply in the final week of June. Shipments from Shanghai to LA were down 20% W/W and fell 44% Y/Y. Likewise, the Shanghai to NY lane was 12% W/W and 27% Y/Y.
This is a global phenomenon. Shanghai to Rotterdam lanes are down 56% Y/Y while Shanghai to Genoa are down 42%. Sluggish global order volumes are partly to blame. Trade uncertainty is having a significant ripple effect on global volumes, and that has pulled down rates as a result. That can rebound quickly, and surges in freight volumes could come quickly as US trade deals are struck with various countries (the US anticipates completing 17 more “deals” in July), and that could free up some order activity.
In addition, there are some bits of evidence that the volume in the Suez Canal is starting to increase as Houthi Rebel attacks are slowing. Many carriers are still using naval escorts to move through the region, but some recent data suggests that transits through the Suez Canal have increased from 20 daily transits to 36-37 (vs. pre-crisis levels of 72-75 in 2023). So, it is starting to build some momentum, but carriers are taking their approaches cautiously and it will still take time to return to pre-crisis levels. Remember, a transit through the Suez Canal can shave 9-11 days of transit off of Asia to many European markets (and speed up transits and capacity availability around the world in the process).
