For manufacturers, freight is rarely a line item that stays quiet for long. It moves with fuel, with capacity, and with the broader economy, and right now all three are pushing in the same direction. The latest TD Cowen/AFS Freight Index projects record-high freight rates across every major shipping mode in the second quarter of 2026, driven in large part by a sharp run-up in fuel prices.
If your business ships finished goods, raw materials, or both, that matters to your margins. Here is a plain-language look at what the data shows and why the cost increases may prove stickier than past spikes.
The short answer is fuel, but it is not the only factor. The conflict in the Middle East helped push oil prices up roughly 50% in March, which in turn lifted inflation to 3.3% for the month. According to the U.S. Energy Information Administration, diesel costs rose steeply through the quarter, and parcel carriers moved quickly to pass those increases along through fuel surcharges.
Layered on top of fuel are two structural pressures: tightening truck capacity and disciplined pricing by carriers who have spent the past several quarters protecting their margins. The combination is what AFS Logistics describes as a higher-cost environment that will not unwind quickly.
As Andy Dyer, CEO of AFS Logistics, put it, businesses should brace for "a new normal" of elevated fuel costs, noting that the related pricing changes, particularly in parcel, tend to linger even after fuel prices recede.
The index measures rates against a 2018 baseline and forecasts where each mode is headed. For Q2 2026, the projections are notable:
For a manufacturer shipping across multiple modes, those increases compound. They also outpace inflation by a wide margin. AFS offers a telling example: a five-pound package shipped by ground from Atlanta to a residential address in New York cost $22.52 in 2022 and $31.94 in 2026, a 41.8% increase against cumulative inflation of just 15.1%. The fuel surcharge portion alone rose 131% over that span.
There is a meaningful upside buried in this data. Demand is showing early signs of recovery. The Institute for Supply Management reported that its Manufacturing PMI registered 52.7% in March, a third consecutive month of expansion, with gains in new orders and production. Stronger industrial activity generally supports freight demand, and that recovery aligns with the positive shipment trends carriers are now seeing.
The challenge is that recovering demand and rising costs are arriving together. Carriers tightening capacity and holding firm on pricing means manufacturers cannot count on a soft market to absorb fuel increases. Instead, the cost pressure becomes part of the baseline.
Even in an expensive environment, the data points to pockets of opportunity. Carrier behavior is not uniform. In ground parcel, for example, UPS has tightened pricing while FedEx has used deeper discounts to chase volume, a rare divergence that can work in a shipper's favor. Larger shippers also tend to hold more leverage to negotiate concessions than small and mid-sized customers.
For manufacturers, that suggests a few areas worth a closer look:
These are decisions that benefit from a clear view of your own freight data alongside the broader market picture, which is exactly the kind of analysis that informs sound financial planning.
Record-high freight rates signal a structurally higher-cost environment, not a temporary blip. For manufacturers, that makes proactive cost management more important than reactive scrambling when an invoice comes in higher than expected. Understanding how fuel, capacity, and carrier strategy flow through to your bottom line is the first step toward managing it.
If your manufacturing business is weighing how rising freight costs affect your margins, pricing, and broader financial strategy, GBQ's manufacturing team can help you think through the numbers. Contact us to start the conversation.