The latest ISM Manufacturing PMI and LMI reports confirm what many in logistics already feel: demand is strong, but capacity is heavily constrained. Learn why transportation capacity is in contraction for the 11th straight month, pushing freight rates and diesel prices significantly higher. We break down the key numbers from October’s economic data, including surging production and new orders, coupled with historically low inventories. Prepare for continued high costs and tight networks as 2024 approaches.
Transportation capacity has now contracted for 11 consecutive months, according to the October Logistics Managers Index released Nov. 3, with the Transportation Capacity Index reading of 38 — well below the 50-point expansion threshold and down sharply from 54.5 a year ago. The reading arrived the same morning as October’s ISM Manufacturing PMI, and both reports reinforce the same trend: demand is building while capacity continues to fall short.
The overall LMI came in at 70.7 in October, up from 70.2 in September and 13.3 points higher than the 57.4 recorded last October — the second-highest reading in four years. Transportation prices, the most dramatic mover in the index, surged from 61.7 last October to 88 this October. Respondents expect that figure to climb above 90 over the next 12 months, signaling no expectation of pricing relief.
“Transportation capacity is at 38. It’s continuing to sit in that contraction portion of the report at under 50 for the 11th straight month,” said Julie Van de Kamp. “A year ago it was at 54.5. All the way down to 38 this month.”
“The LMI report does cite Sonar data showing new truckload contracts are up 13.11% over the contract rates that they are replacing. So more evidence that we are going to continue to see increased rates as we get into 2027.” — Julie Van de Kamp
The ISM Manufacturing PMI added further pressure context, printing at 55.5 in October — a full point above expectations and the 10th straight month of expansion. Production sits at 59, its highest level in five years, while customer inventories remain at 41.6, a level the ISM continues to characterize as too low. That reading points to sustained future production and freight demand. The ISM’s prices index held at 75.2, with survey respondents citing pricing volatility, extended lead times, tariffs, the Iran war, and elevated diesel costs as primary concerns.
Sonar tender data corroborates both reports. The Sonar Tender Rejection Index stood at 12.86% on Nov. 3, with October averaging around 13.5% compared to 5.73% in October of the prior year. Tender volume ran approximately 7% higher year over year in October. Spot rates are up nearly 47% year over year, contract rates are up nearly 20% and sitting at a 52-week high, and diesel remains above $6 a gallon — a 71% year-over-year increase.
Inventory levels registered 66.9 on the LMI, the fastest build since September 2022, suggesting retailers may be making a late push to stock for the holiday season — a dynamic that aligns with the ISM’s too-low inventory signal. Aggregate logistics costs rose to 257.5 in October from 246 in September, the highest reading since March 2022. Van de Kamp said she expects capacity to remain constrained “certainly into 2027.”
- Transportation Capacity Index hit 38 in October, marking 11 straight months of contraction and down from 54.5 a year ago.
- Spot rates are up nearly 47% year over year; contract rates up nearly 20% and at a 52-week high, with diesel above $6 a gallon.
- New truckload contracts are being written 13.11% above the rates they replace, per LMI citing Sonar data, pointing to continued rate increases into 2027.
This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.
