On The Horizon - April 14, 2025

Safety Measurement System - POSTPONED

POSTPONED due to conflict. Stay tuned for further details on the rescheduled date.

Join us for a webinar on ISS and CAB!

We will discuss the differences between the two platforms, how to access important information, what it means and what steps to take if you find inaccuracies.

Please RSVP to mwilliams@mttrucking.org to receive the meeting link.

By Bob Costello

Chief Economist & SVP, International Trade & Security Policy

This week, we received a pleasant surprise on the top-line March inflation reports, including the consumer price index and the producer price index, but the slowing price gains may be short-lived as the U.S. faces a number of tariffs even as the Administration put a 90-day pause on “reciprocal” tariffs. More on that below.

To start, the consumer price index or CPI, which measures changes in prices at the retail level, contracted 0.1% from February, which was the first sequential decline since the summer of 2020. Compared with a year earlier, inflation rose just 2.4%, which was the smallest year-over-year gain in over four years. While this is good news, you don’t have to dig too far before finding the main culprit for the downward pressure on overall prices. Overall energy commodities prices (e.g., gasoline, diesel/home heating oil, natural gas) plunged 6.1% from February and 9.5% from a year earlier. There were some other areas that fell too, including transportation services (e.g., airfares) and used car prices (although those will rise as the 25% tariffs hit on new cars produced outside the U.S.), but the most impactful drop was energy.

Excluding volatile food and energy prices, the core-CPI rose a modest 0.1% over February and 2.8% from March 2024. The latter was the smallest gain in four years as well. One trend that continued in March, which I thought would very much help truck freight volumes this year, is the price of services, like experiences including travel, continued to outpace goods inflation. For example, compared with March 2024, durable goods prices fell 1%, non durable goods prices rose just 0.5%, while services was up 3.7%. This differential in inflation could drive more households to buying goods versus going on vacation. This shift in spending towards goods would help truck freight volumes. But unfortunately, I’m worried the new tariffs, which hit goods not services, will change that outlook.

The producer price index or PPI, which measures changes in prices received by producers of goods and services fell 0.4% from February and rose 2.7% from a year earlier. And here too, things were looking good for our industry, with the finished goods PPI down 1.3% from February and up just 0.9% from March 2024.

However, the trucking PPIs jumped in March. (These PPIs include fuel surcharges.) The general freight, long-distance (i.e., non local) truckload PPI surged 1.6% and 5.6% from February and March of last year, respectively. The general freight non-local LTL PPI fell 0.1% from February, but increased 5.5% from a year earlier.

So, inflation overall was looking good in March, but now we have relatively new inflation fears. While the Administration paused the so-called reciprocal tariffs, which is a good thing, we still have many tariffs on the books, including 25% on steel and aluminum from all countries, 25% on imported cars from all countries, and 10% on all countries outside of Canada, Mexico and China. We also have a whopping 125% tariff on imports from China. We have 25% tariffs on non-USMCA compliant goods from Canada and Mexico. And expect more, like pharma, semiconductors, and auto parts. Bottom line, these will accelerate goods inflation in the months ahead (it will take time to work through the system). That means while the economy slows, it will be difficult for the Fed to cut rates to encourage economic growth.