Growth in transportation capacity accelerated in August while price increases slowed, a sentiment survey revealed on Tuesday.
The Logistics Managers’ Index, a monthly poll of supply chain executives, returned a 56.7 reading for transportation capacity in August, 5.8 percentage points higher than in July and the highest reading since May. (The LMI is a diffusion index in which a reading above 50 indicates expansion while one below 50 signals contraction.)
The report said the heightened view on capacity could be tied to smaller carriers coming back to the market as rates improve and given the expectation for a seasonal lift in freight demand.
“The signs of new life in the freight market, along with anticipation of the traditional jump in demand that follows the Labor Day holiday, are likely causing some of the capacity that had been sidelined over the past two years to re-enter the market, accounting for the mild increase in available capacity,” the report stated.
Growth in transportation prices (61.6) declined 2.2 points from July. This was the first month since April the subindex didn’t increase sequentially. The dataset has been in expansion territory in all but one month so far in 2024. Respondents expect the pricing subindex to be well into expansion one year from now, returning a 76.6 reading.
“The prices are still nowhere near the highs of 2020-2021, but it is a marked shift from the 18 consecutive months of contraction from July 2022-December 2023,” the report said.
Transportation utilization (59.5) continued to expand in the month but has remained in a narrow range (4.5-point spread) this year.
The overall LMI (56.4) was basically unchanged in the month as “the logistics industry has continued its slow, steady expansion.” The 8-year-old index has been in expansion territory since December but remains off an all-time average of 61.8. The index stood at 51.2 a year ago.
Inventory levels (55.7) increased 6.1 points and moved back into expansion after three months of contraction.
“This suggests that after running inventories down, firms are building them back up again in anticipation of Q4,” the report said. “This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID.”
Upstream firms like manufacturers and wholesalers returned a reading of 59.4 for inventories during the month compared to downstream companies like retailers (46.3).
“The dichotomy in Inventory Levels is likely indicative of retailers keeping inventories lean to control costs, while their upstream suppliers build up goods in anticipation of orders to come,” the report said. It also said freight sitting at ports could explain some of the disparity between the two groups, which would be a favorable sign for future freight demand as the goods will need to be moved inland.
Inventory Costs (69) increased 3.3 points and have remained above 60 all year.
Warehouse capacity (59.5) increased 5 points from July to the highest reading since March. Lower inventory levels at downstream firms were cited as a reason for the perceived increase in available warehouse space. Warehouse utilization (57.6) remained steady in the month while warehouse prices (63.8) increased 2.8 points.
Warehouse prices remain well into expansion territory even after declining 11.2 points from two years ago. Respondents expect the prices to be growing at a faster pace (68.8) one year from now.
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.
