Freight & Industrials Outlook: What’s Driving Growth into 2027?

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6}#fwtv_GWYeP5UcFaw. fwtv-panel p{margin:0 0 12px}#fwtv_GWYeP5UcFaw. fwtv-transcript p{margin:0 0 12px}SummaryView TranscriptThe US industrial sector is experiencing its strongest growth in years, with the ISM index hitting 55. 6 for the seventh consecutive month.

We dive into the surprising drivers, from AI data centers and tax incentives to resilient consumer spending. But are there risks lurking with capacity exits and grid infrastructure? Senior Industrials Analyst Ryan Farlow shares his insights on what’s ahead for manufacturing and the freight market. The ISM Manufacturing index hit 55.

6 — its highest reading in years — marking seven straight months of expanding industrial activity, RSM industrial analyst Ryan Farlow told FreightWaves.

Farlow said 15 of the 18 sectors tracked within ISM Manufacturing increased in the most recent reading, a sign that demand has spread well beyond AI data center construction into aerospace and defense, semiconductors, and chemicals.

The breadth of that expansion matters to carriers and shippers because it signals durable freight demand rather than a single-sector spike.

Farlow attributed the industrial rebound to several overlapping forces: data center construction, tax incentives tied to reshoring under the One Big Beautiful Act, tariff policy pushing manufacturing closer to home, and a resilient consumer. Real private demand in the most recent GDP print came in at 3. 9%, and RSM projects GDP growth of roughly 2.

5% in the second half of the year, with 2027 shaping up as even more favorable than 2026. “The freight recession is over,” Farlow said, pinpointing November and December of last year as the turning point driven by regulatory and compliance enforcement.

RSM works with more than 500 transportation and logistics companies, with 80% to 90% of those clients in the middle market or upper middle market. Farlow said executives across that client base are now reporting contract rate increases and stronger July results, with spot prices having risen substantially and contract rates expected to follow.

“Costs in trucking are as high as they’ve ever been,” Farlow said, citing the American Transportation Research Institute’s most recent Cost in Trucking report, released last month, and noting that middle-market carriers are running aging equipment longer while navigating elevated insurance expenses and litigation risk from cases such as Montgomery and C. H.

Robinson. On the supply side, Farlow said capacity exits that began with rising bankruptcies in 2023 and 2024 have accelerated under the crackdown on non-domiciled CDLs and the ELP mandate. The driver pool has shrunk to the point where finding qualified drivers is now the top operational concern he hears from client executives.

Compounding that pressure: since 2019, registered motor carriers increased 30% while shipment volumes declined 10%, a mismatch that is now correcting as weaker operators exit.

Freight expenditures are up 12% since 2019 even as shipments are down 10%, a gap Farlow said reflects growing efficiency — carriers moving larger volumes in fewer loads across both truckload and LTL.

That dynamic is helping the supply-demand imbalance self-correct, but it also means raw shipment counts understate the actual volume of freight moving through the network. Looking ahead, Farlow flagged data center construction slowdowns as the primary risk to the industrial outlook.

Birmingham itself imposed a six-month moratorium on new data centers, and roughly 500 municipalities nationwide have enacted bans or pauses. He said the core issue is grid underinvestment rather than data centers themselves, and estimated it will take at least three to five years to make meaningful progress on transmission capacity.

Despite near-term friction, Farlow said RSM believes the data center buildout remains a multi-year tailwind for industrials and freight, and that private equity funds investing in transportation infrastructure are already anticipating a surge in deal activity by 2027. ISM Manufacturing reached 55.

6, its highest level in years, with 15 of 18 sub-sectors expanding — broadening beyond AI data centers to aerospace, defense, and