The logistics industry held steady in October, with transportation metrics more closely resembling a firming market following a three-year-plus freight recession, according to a monthly sentiment survey.
The Logistics Managers’ Index – a diffusion index in which a reading above 50 indicates expansion while one below 50 signals contraction – returned a 54.5 reading for transportation capacity in October. That was 70 basis points lower than September’s reading and the slowest growth rate for capacity in the past three months.
Transportation utilization (57.3) jumped 7.3 percentage points, with transportation prices (61.7) up 7.5 points. October saw a reversal of the “negative freight inversion” that occurred in the prior two months, during which capacity grew faster than rates.
Downstream supply chain managers (retailers) noted significant pricing pressure in October, returning a 70 reading, compared to a 56.4 reading from upstream survey respondents (manufacturers and wholesalers).
“This is similar to the dynamics observed in the Fall of 2018, when Upstream B2B freight slowed down due to U.S. tariffs on Chinese imports but B2C movements remained steady due to strong U.S. consumer activity,” the Tuesday report said. The freight market deteriorated into 2019, “after holiday spending had concluded.”
Momentum changed in the back half of October as responses around capacity dropped 10.5 points to 51.3 in the last two weeks of the month. Over the same period, utilization jumped nearly 15 points to 61.8 and pricing surged nearly 13 points to 65.6.
The forward outlook for transportation fundamentals also tightened in the month. The one-year-forward forecast for capacity fell 10 points to 41.4, with pricing expectations jumping 13.2 points to 79.9.
The report didn’t say if a heightened regulatory environment (non-domiciled CDL restrictions and English language proficiency enforcement) weighed on sentiment from the group.
The overall LMI stood at 57.4 in October, identical to September’s reading and the eighth straight month the index was below an all-time average of 61.4.
Inventory levels (49.5) fell 5.6 points as goods moved to retail stores and consumers began their holiday shopping. This was the first contractionary reading on stock levels since July 2024. The report said the drawdown occurred in the first half of the month (39.1), with slight inventory growth (54.3) seen in the back half.
“Essentially, supply chains have gone from being somewhat static and weighted down by inventory, to moving in a more dynamic, seasonally consistent manner,” the report said.
Even with the modest contraction in inventories, inventory costs (73.2) remained elevated, suggesting “significant price expansion” in goods and potential headwinds to consumer spending in the fourth quarter.
“This means that retail sales may be more disentangled from shipping volumes than normal, meaning that even if sales are up over the holidays (as seems likely) it may not necessarily mean we see a significant boost in the freight market,” the report said.
As inventories moved out of the warehouses, warehousing utilization (56.5) fell 8.8 points but remained in expansion territory. Warehousing capacity (52) was up 50 bps.
Warehousing prices (67.7) increased 1.8 points as goods flowed into retail storage space that is closer to the consumer and more expensive to lease.
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.
