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Trucking demand falls faster than inventories in December

Consumer demand may still be underperforming shipper forecasts

Photo: Jim Allen - FreightWaves

Chart of the Week: Logistics Managers’ Index – Inventory Levels, Outbound Tender Volume Index – USA SONAR: LMI.INVL, OTVI.USA (FreightWaves SONAR)

We’re seeing an early sign that demand for goods is eroding faster than companies were expecting.

The Logistics Managers’ Index (LMI) inventory level component increased from 55 to 57 from November to December, indicating inventory growth accelerated for the first time since the summer. Meanwhile, trucking demand as measured by the Outbound Tender Volume Index fell.

Trucking companies are hopeful that inventories will be rightsized in the first half of the year, but this chart shows that is not a given. Companies have struggled with demand forecasts coupled with supply chain congestion since 2020. Transportation networks are now mostly unclogged and shippers are receiving their orders on a more timely basis. The problem may be that now the demand for their goods is eroding faster than they expected as they try to reduce their inventory levels. 

The LMI is a diffusion index that measures expansion (values over 50) and contraction (values under 50) of various logistics functions based on surveys of supply chain professionals. The inventory level component fell from an all-time high of 80.18 — anything over 70 is extreme — last January to 54.8 in November, indicating that inventories went from growing at light speed to crawling. 

While December’s value of 57.3 is still not extreme, it is moving in the wrong direction for many shippers. The fact that trucking demand fell simultaneously suggests that companies still do not have proper alignment of ordering cadence to sales.  

One of the country’s largest shippers, Walmart, said it is making a concerted effort to reduce inventories heading into 2023 but still had inventory aging issues late last year. 


Consumer conditions have only deteriorated and the full brunt of the Fed’s war on inflation has yet to be felt throughout the economy. 

Consumers are incurring debt at nearly the same pace they were prior to 2020.

Consumers are saving less and have returned to incurring debt at nearly the same pace they were prior to 2020. With interest rates increasing, this debt is more expensive than it was before the pandemic and will reduce consumers’ spending ability in the future. This is a big gray area for many companies trying to forecast demand this year. 

Transportation providers are already bracing for hitting a bottom of the freight market in regard to demand this winter. Many trucking companies were able to stockpile cash during the pandemic as rates increased and provided much higher margins. Selling used equipment at all-time premiums also assisted in filling the coffers. 

This will pad their landing for a while, but smaller operators have been crushed by rising fuel costs and a collapsing spot market and don’t have the legroom for an extended period of low demand relative to capacity. 

Inventories being rightsized in relation to demand may provide stability to shipping patterns, but it is by no means the end to the down cycle. It will just mean shipping will become more predictable.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

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7 Comments

  1. Wayne Cummings

    I’m new in this business, and worried that truckers are being ripped off, and some shippers not all are unconcerned. It’s more than just the bottom line. It’s about making an honest living. I haven’t gotten my broker authority yet, just doing research, and praying that we all can survive and support our families. We shall see. God’s blessings to you all.

  2. Michaellarrywilliams

    It’s bad out here everyone is getting no pay for what we do and truck stops are charging 3 times what there products cost them they are robbing us blind and they don’t care

  3. nicholas lopez

    How is demand dropping , and warehouses over stocked and shipper and receivers are slower way slower like really really bad. Bring back start charging them. I believe inflation gonna keep being a topic along with layoffs and less demand yet I believe investments are gonna push thru.

  4. Richard M Rehmer

    Many of my friends thought I was crazy just to park my truck. I am lucky to own the truck and the trailer outright, but after 36 years of doing this, things just didn’t add up. I love to drive; that is the only reason I do it, but it has to pay. My wife is ready for me to get back on the road, LOL. Now my friend are not so vocal about what I did. I would love to come back out in March. But until I see something more positive, I think I will just leave it parked because the future isn’t looking very good. I can drive someone else dump truck and make more money than the rates I am seeing. Fuel is still up, and the rate is back down to the Obama time. You can not haul .90 cents per mile freight. Pay the higher price for everything else and expect to make a living much less break even. I feel sorry for these young kids that saw a way to make big bucks and ran out and bought new trucks and trailers, big payments, and now the rates don’t support them to make the costs let alone support a family

  5. I warned you

    Rate have dropped more than %50 since December 2022.
    Huge collapse incoming and it is looking very ugly.
    Shipper are very slow taking 24 hours to load.
    Receiver refusing product because of “late delivery” because shipper is lazy.
    This entire logistics sector is coming apart at the seams and the more FMCSA gets involved the worse it gets for the Average OWNER OPERATOR.

    Soon everyone will be driving for big corporations only.

  6. Boone Trucking

    There’s more to this than what people are seeing Our rates have dropped Unreal while everything around us is going up 75% If you want more trucks quit playing with our money

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Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also one of FreightWaves’ Market Experts. With a degree in Finance, Strickland spent the early part of his career in banking before transitioning to transportation in various roles and segments, such as truckload and LTL. He has over 13 years of transportation experience, specializing in data, pricing, and analytics.