Logistics Managers’ Index Indicates Slower Pricing Growth
A recent sentiment survey has shown that growth in transportation capacity increased in August while price hikes slowed down. According to the Logistics Managers’ Index (LMI), a monthly survey of supply chain executives, transportation capacity registered a reading of 56.7 in August, marking an increase of 5.8 percentage points from July and the highest figure recorded since May. (The LMI is a diffusion index where a reading above 50 signals expansion, and below 50 indicates contraction.)
The report suggests that the improved perception of capacity may be linked to smaller carriers re-entering the market as rates enhance, along with expectations for a seasonal boost in freight demand. “The resurgence in the freight market, coupled with the expected traditional increase in demand following the Labor Day holiday, appears to be prompting some capacity that had been idle over the past two years to return to the market, which accounts for the moderate rise in available capacity,” the report noted.
In terms of pricing, growth in transportation prices registered at 61.6, reflecting a decline of 2.2 points from July. This marks the first month since April that the pricing subindex did not show sequential growth. The dataset has remained in the expansion range for all but one month this year. Survey participants anticipate that the pricing subindex will demonstrate significant growth one year from now, projecting a reading of 76.6. “Prices are still far from the peaks seen in 2020-2021; however, this represents a significant turnaround from the 18 months of contraction that spanned July 2022 to December 2023,” the report stated.
Transportation utilization continued to expand at 59.5 this month, although it has remained within a narrow range (a 4.5-point spread) throughout 2024. The overall LMI recorded a reading of 56.4, showing little change month-over-month, indicating that “the logistics industry is continuing its slow, steady trajectory of expansion.” This 8-year-old index has been in expansion since December, although it remains below its all-time average of 61.8, compared to a reading of 51.2 from a year ago.
In a positive development, inventory levels increased to 55.7, up 6.1 points and moving back into expansion territory after three months of contraction. “This indicates that after depleting their inventories, companies are now restocking in anticipation of Q4,” the report explained, highlighting a return to pre-COVID seasonality patterns. Upstream firms, such as manufacturers and wholesalers, reported an inventory reading of 59.4 for the month, whereas downstream companies like retailers showed a lower figure of 46.3.
“The difference in inventory levels likely reflects retailers maintaining lean inventories to manage costs, while upstream suppliers prepare for anticipated orders,” the report added. It suggested that freight sitting at ports may account for some of the disparity between the two sectors, which bodes well for future freight demand as these goods will eventually need to be transported inland.
Inventory costs climbed to 69, increasing by 3.3 points and remaining above 60 throughout the year. Warehouse capacity rose to 59.5, a 5-point jump from July, reaching the highest level since March. The reduced inventory levels at downstream firms were cited as a reason for the increased warehouse space availability. Warehouse utilization held steady at 57.6 for the month, while warehouse prices increased by 2.8 points to a reading of 63.8.
Despite a drop of 11.2 points from two years ago, warehouse prices remain firmly in the expansion range, with respondents predicting a faster growth rate in prices (68.8) one year from now. The LMI is a cooperative effort among Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, in partnership with the Council of Supply Chain Management Professionals.
