Transportation capacity was up slightly in November, but pricing remained firmly in expansion territory, a Tuesday sentiment survey revealed.
The Logistics Managers’ Index, a monthly query of supply chain managers, registered a 52.6 reading for transportation capacity in the month. That was up 1.7 percentage points from October. Transportation utilization (60.5) ticked up less than 1 point while transportation pricing (63.8) remained near October’s two-year high.
The pricing metric faced a modest headwind as diesel prices were roughly 2% lower than in October. Transportation prices have remained inflationary in every month of 2024 except April, according to the report.
The LMI is a diffusion index wherein a reading above 50 indicates expansion while one below 50 signals contraction.
The muted sequential change rates in transportation metrics provide “further evidence that the freight market has moved back into equilibrium,” the report stated.
Transportation capacity contracted slightly in the second half of November after posting a 57.3 growth rate in the first 18 days of the month. The subindex hasn’t contracted for a full month since March 2022.
“The market has always had excess capacity ready to come online any time prices increased,” the report said. … “If we were to see Transportation Capacity contract in any month, December would be a strong candidate due to last minute holiday shopping.”
Large firms, or those identified as having more than 1,000 employees, reported ample capacity (56.7) during the month when compared to small firms (47.8). There was a similar spread in pricing disparity between the two groups, with smaller firms (69.1) signaling much higher rates.
“This suggests that smaller firms may be having difficulty securing freight on the spot market,” the report said. “This is likely due to seasonal tightness in the market and may also explain the difference we see between the two groups in price.”
Collectively, respondents returned an 80.9 one-year forward expectation for the pricing subindex.
SONAR: Outbound Tender Reject Index for 2024 (blue shaded area) and 2023 (pink). A proxy for truck capacity, the Outbound Tender Reject Index, shows the number of loads being rejected by carriers. To learn more about SONAR, click here.
SONAR: The National Truckload Index (linehaul only – NTIL) for 2024 (blue shaded area) and 2023 (pink). The NTIL is based on an average of booked spot dry van loads from 250,000 lanes. The NTIL is a seven-day moving average of linehaul spot rates excluding fuel. To learn more about SONAR, click here.
The overall LMI registered a 58.4 reading in November, up 9 points from a year ago, and marking one full year in expansion territory. The November reading was just slightly below October’s two-year high. The index has been in a tight range the past three months, which the report coined “a steady, sustainable pace.”
“Unlike many of the market shifts we observed in the past, this one was not a sudden spike stemming from an external jolt (e.g. pandemic, tax cut, international conflict),” the report said. “Instead, the story of the logistics industry in 2024 has been a healthy, organic recovery based on steady improvements in the fundamentals of the economy.”
Inventory levels (56.1) were down 3.3 points in the month but in line with normal seasonality. Smaller firms (63.4) significantly added inventory compared to larger companies, which saw no change.
Inventory costs (68.8) were up 2.9 points as more inventory is being held downstream at the retail level of the supply chain.
“Overall Inventory Levels are lower because there is less inventory in the system than there was in October, but costs are higher because a greater percentage of the inventory that remains is being held by retailers where costs are often higher due to their location closer to consumers.”
Warehousing capacity (56.7) recorded an eighth straight month of expansion while warehousing utilization (58.9) was off 4 points. Utilization was 11 points higher at downstream companies.
Warehousing pricing (68.8) was up 2.9 points to the fastest growth rate in a little more than a year.
The one-year forward predictions for the three pricing components of the LMI added up to 225, the highest level in two years, but may “not necessarily be inflationary.”
“Taken altogether, respondents are predicting a busy 2025 in the logistics industry, but with enough flex capacity that price growth will be high but not crushingly so, continuing the ongoing narrative of the soft landing and goldilocks economy,” the report concluded.
The LMI is a collaboration among Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University and the University of Nevada, Reno, conducted in conjunction with the Council of Supply Chain Management Professionals.
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