The Hidden Signal in Short-Haul Freight: A Barometer of Economic Health

In an era of economic uncertainty, investors are increasingly turning to unconventional metrics to gauge the health of the economy. Among these, short-haul freight—specifically shipments under 400 miles—has emerged as a critical bellwether, offering insights into consumer behavior, manufacturing activity, and supply chain dynamics. While often overlooked, this segment of the transportation sector provides a nuanced lens through which to assess both current conditions and future trends.

The Metrics That Matter

Short-haul freight is tracked through metrics such as the Freight Transportation Services Index (TSI) and Route Guide Depth (RGD). The TSI, which includes trucking and rail data, rose 1.9% year-over-year in January 2025 but remains 2% below its 2019 peak. Meanwhile, the RGD—a measure of tender rejections requiring backup strategies—worsened in late 2024, reaching 1.16 in December compared to 1.11 in the same period a year earlier. These figures signal mild strain on short-haul capacity, driven by seasonal demand spikes and lingering supply chain inefficiencies.

A particularly telling metric is Less-Than-Truckload (LTL) tonnage, which declined by 5.8% in 2024 compared to 2023. This reflects softer demand for short-haul, small-batch shipments, often linked to manufacturing declines and housing slumps. Yet LTL rates, after collapsing to near-zero growth late in 2024, are projected to rebound modestly in 2025, with gains of 2–4% anticipated as the manufacturing sector exits a 26-month contraction.

Why Short-Haul Freight Signals Economic Health

1. Consumer and Industrial Spending:
   Short-haul freight is tightly coupled with consumer and industrial activity. For instance, the ISM Manufacturing Index rose to 50.9 in January 2025, signaling expansion, while housing starts—a key driver of freight for construction materials—rebounded 11.2% in February. Weakness in these areas in 2024 dragged down LTL volumes, underscoring short-haul freight’s sensitivity to macroeconomic shifts.

2. Regional Economic Activity:
   The RGD’s regional variations highlight localized economic conditions. In the Midwest, post-winter storm recovery improved RGD metrics by 6.6% in February meiden, while the South saw only marginal improvements. This geographic granularity makes short-haul data a powerful tool for identifying emerging regional trends.

3. Supply Chain Dynamics:
   Short-haul freight often handles last-mile delivery, inventory redistribution, and emergency restocking (e.g., post-disasters). Its volatility in late 2024—driven by winter weather and tariff-driven pre-orders—reflects broader supply chain stresses, such as port congestion and inventory mismatches.

Investment Implications

For investors, short-haul freight metrics provide actionable signals:

• Current Weakness, Future Opportunity:
  The 5.8% decline in LTL tonnage in 2024 suggests caution in sectors tied to manufacturing and housing. However, the projected 2–4% rate growth in 2025 points to recovery opportunities in transportation stocks like Old Dominion Freight Lines (ODFL) and XPO Logistics (XPO), which specialize in regional distribution.

• Regulatory and Environmental Risks:
  The CARB Clean Truck Regulation mandates zero-emission vehicles (ZEVs) in key markets, creating costs for carriers but also opportunities in EV adoption. Investors in companies like Nikola (NKLA) or Plug Power (PLUG) could benefit from this transition.

• Tariff and Inflation Uncertainty:
  New tariffs threaten to disrupt import volumes, reducing short-haul drayage demand. Conversely, pre-tariff stockpiling may temporarily boost freight activity. Monitoring container import data (e.g., via the Baltic Dry Index) can help anticipate these shifts.

Challenges Ahead

While short-haul freight signals stabilization, risks remain:
- Overcapacity in Trucking: Private fleets and excess carriers continue to suppress spot rates.
- Housing Market Drag: Elevated mortgage rates are likely to keep construction-related freight subdued.
- Weather Volatility: Winter storms and extreme weather events could intermittently disrupt regional networks.

Conclusion

Short-haul freight is far more than a niche sector—it is a microcosm of the broader economy. The 5.8% decline in LTL tonnage in 2024 and the RGD’s worsening performance reflect the challenges of weak consumer spending and supply chain bottlenecks. However, the projected 2–4% rate growth in 2025, alongside manufacturing’s return to expansion, suggests that short-haul freight is an early signal of recovery.

Investors should monitor these metrics closely. The correlation between short-haul volumes and GDP growth (as shown in the graph above) has held for over a decade, and the current data reaffirms its predictive power. While risks like tariffs and inflation persist, short-haul freight’s role as a bellwether offers a clear path to navigating economic uncertainty.

In a world of complex indicators, the humble truckload of regional freight remains one of the most reliable guides to the economy’s next move.