FOR RELEASE: Tuesday, November 5th, 2024
Contact:
Zac Rogers, Ph.D.
Logistics Manager’s Index Analyst
Associate Professor, Supply Chain Management
Department of Management
Colorado State University
Fort Collins, Colorado
(970) 491-0890
E-mail: [email protected]
http://www.logisticsindex.org
Twitter: @LogisticsIndex
Contact:
Zac Rogers, Ph.D.
Logistics Manager’s Index Analyst
Associate Professor, Supply Chain Management
Department of Management
Colorado State University
Fort Collins, Colorado
(970) 491-0890
E-mail: [email protected]
http://www.logisticsindex.org
Twitter: @LogisticsIndex
October 2024 Logistics Manager’s Index Report®
LMI® at 58.9
Growth is INCREASING AT AN INCREASING RATE for: Warehousing Utilization, Transportation Capacity, Transportation Utilization, and Transportation Prices.
Growth is INCREASING AT A DECREASING RATE for: Inventory Levels, Inventory Costs, Warehousing Capacity and Warehousing Prices
LMI® at 58.9
Growth is INCREASING AT AN INCREASING RATE for: Warehousing Utilization, Transportation Capacity, Transportation Utilization, and Transportation Prices.
Growth is INCREASING AT A DECREASING RATE for: Inventory Levels, Inventory Costs, Warehousing Capacity and Warehousing Prices
(Fort Collins, CO) — The October Logistics Manager’s Index reads in at 58.9, up (+0.3) from September’s reading of and at its highest levels since September 2022. The overall index has now increased for eleven consecutive months, providing strong evidence that the logistics industry is back on solid footing. The clearest example of this is the jump in the expansion for Transportation Prices which were up (+5.7) to 64.1, which is the fastest rate of growth for this metric since May of 2022. Transportation Capacity was fairly consistent with last month, increasing very slightly (+0.8) to 50.8 and implying very minimal levels of growth. Interestingly, Transportation Capacity actually contracted in the first half of October (45.8) before expanding again later in the month (54.3). It will be interesting to see if capacity continues to loosen in November or if it moves back towards no change. It is possible that as Transportation Prices continue to rise more idle capacity will come off the sidelines to take advantage of the increased opportunity, leading to the somewhat counterintuitive situation that we now find ourselves in where both Transportation Prices and Capacity are increasing. By contrast, our three warehousing metrics have remained fairly stable as capacity grows at a steady rate (-0.1 to 55.8) and Warehousing Utilization (+1.9 to 62.9) and Warehousing Prices (-1.1 to 65.8) are relatively consistent with the changes observed in September. Underlying all of this is the continued expansion of Inventory Levels (-0.4 to 59.4) and Inventory Costs (-5.5 to 65.8). Breaking the streak of the last 6 months, more Inventory Level expansion is now coming from Downstream retailers (65.7) than from Upstream firms (56.3), suggesting that retailers are stocked up, and will likely continue to stock up, for the holiday shopping season.
Researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued this report today.
Results Overview
The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50.0 indicates that logistics is expanding; a reading below 50.0 is indicative of a shrinking logistics industry. The latest results of the LMI summarize the responses of supply chain professionals collected in October 2024.
The LMI read in at 58.9 in October, which is up (+0.3) from September’s reading of 58.6. This is the fastest rate of expansion for the overall index since September of 2022. While this is the 25th consecutive reading below the all-time average of 61.8 for the overall metric, the current trajectory suggests that may not be the case for much longer.
The sustained growth in the LMI over the last few months is reflected in the steady growth of the U.S. economy throughout Q3. The 2.8% growth was driven largely by consumer spending, which was up 3.7% year-over-year (up from the 2.8% y-o-y growth in Q2), as well as an 8.9% growth in exports[1]. The increased consumer spending in Q3 was likely one of the signals firms have relied on in their decisions to increase exports throughout the second half of 2024. Spending may have been driven by the continued deceleration of inflation, as the PCE was only up 1.5% year-over-year in Q3, which is the lowest quarterly rate of inflation growth in four years. Core PCE inflation, which excludes food and energy, read in at 2.2%. Drilling in to a more micro level, core September PCE was up 2.1%, down from the 2.7% growth seen a year ago and essentially in line with the Fed’s stated target of 2% annual growth[2]. There are also some indicators that inflation will continue slowing, as wholesale prices in the U.S. were unchanged month-over-month in September – standing in contrast to the 2.8% increase seen over the same period in 2023. Because wholesale price increases are generally passed down to retailers and consumers, this stabilization may represent some price relief yet to come[3]. In the last week of October, The Conference Board reading of U.S. consumer confidence jumped up to 108.7. This is an increase of 9.5-points which is the largest jump since March of 2021. The proportion of respondents anticipating a recession in the next year also fell to its lowest level since July of 2022 (which was the first month the question was included in the survey)[4].
It was not all positive news in October. The U.S. added only 12,000 jobs which was significantly below expectations and is down from previous months. Transportation and warehousing jobs remained essentially unchanged in October, which is not what one might expect heading into the traditional peak season[5]. This low number was at least partially due to strikes at Boeing, and the aftermath of the two hurricanes that hit the East Coast early in the month[6] and may have cost the economy somewhere around 100,000 jobs[7]. However, even with those anomalies, job growth has been slowing over the last three months, providing another indication that the level of economic growth in the U.S. has moved to a more sustainable level and that interest rates can continue to come down. A big reason for the slowing rates of inflation is how well supply chains are working right now. According to the San Francisco Fed, supply-driven inflation was negative in September, meaning that the abundance of goods such as fuel, consumables, and groceries drove prices down. This marks the third time in the past 10 readings that supply has been deflationary for the U.S. economy[8]. Taken altogether, the news on inflation has caused analysts to expect that the Fed will cut interest rates by another quarter point at their meeting this week and several more times in 2025[9].
The slowing rate of inflation is likely behind the continued strength of the American consumer. Consumer spending is highlighted by Amazon’s robust Q3 numbers, in which they reported $158.9 billion in sales, with much of it driven by greater-than-expected activity in its retail business. Amazon expects continued growth, predicting sales of $188.5 billion in Q4[10]. The retailer’s October Prime Day can be a canary in the coalmine for holiday ecommerce sales. The numbers for the 2024 event were the largest in firm history[11], suggesting that more consumer activity may be on the horizon in Q4. Based on the level of inventories moving around U.S. supply chains it is clear that retailers are expecting strong consumer spending to continue. Inventory Levels continue to grow (-0.4) at a rate of 59.4. These numbers are even strong for Downstream retailers, who reported their most robust expansion of 2024 with a growth rate of 65.7, outstripping their Upstream counterparts (56.3). Interestingly, only a marginal difference exists for Inventory Costs between Upstream (66.4) and Downstream (64.7) firms. The metric continues to grow at 65.8 overall, but at a slightly slower pace (-5.5) than we saw in September.
Our inventory metrics were both significantly more robust in early October. Inventory Levels read in at 66.7 earlier in the month, and then dropped to a slower expansion of 54.1 in the back half. The same was true for Inventory Costs, which read in at 71.4 in early October and then dropped to 61.9 in the second half of the month. When taken together, this suggests that seasonal inventories likely peaked in mid-October and will now come down (while still being continually replenished) due to holiday shopping. This would be consistent with what we saw in the past two years, when seasonal inventory growth peaked in October and then slowed down through November and December. The only time in recent history that this did not happen was in December of 2021, which we now know was a precursor to the inventory bullwhip that staggered retailers in early 2022 and was the genesis of the freight recession.
Inventory growth may slow down, but the JIT-nature of U.S. retail supply chains means that it will still continue to flow in through U.S. ports. TEU volumes coming through the Port of Los Angeles were up 190% year-over-year as more inventory shifted to the West Coast due to the twin hurricanes and 3-day work stoppages that impacted East and Gulf Coast ports early in the month[12]. The increased volume has been good for maritime shippers. Maersk reported revenues of $15.8 billion in the quarter ending on September 30th – up considerable from $12.1 billion reported a year earlier. Container volumes were up 0.3% year-over-year, but it’s annual volumes are up 4-6%[13]. As part of an effort to reduce delivery delays, Maersk and Hapag-Lloyd have announced plans to consolidate loads onto larger ships and to also make fewer stops at ports of call. This plan is set to roll out through their “Gemini” partnership next February. Currently the two shippers provide 55% on-time delivery rates. Their stated goal is to get that number up to 90% through this program[14]. The move to 20,000 container ships will not only provide economies of scale in the sea, but it should also allow for some domestic freight efficiencies.
With the start of the Q4 shopping season, inventories appear to be turning over more quickly, leading to the slow expansion of Warehousing Capacity (-0.1) at 55.8. Continued evidence of moderation in the warehousing industry is seen in reports that developers have pulled back on construction. There was 309 million square feet of warehousing under construction in Q3, which is down 43% year-over-year[15]. This pullback is reflected in the continued growth that we have seen in available Warehousing Capacity over the last year. During the inventory crunch of 2022 facilities could not be built quickly enough, and warehousing under construction averaged nearly 700 million square feet. I today’s more JIT-oriented environment, that level of building is no longer needed. Although it should be acknowledged that the amount of warehousing going up now is similar to what was being built in late 2019, which is likely the last time JIT methods were as prolific as they are today. It will be interesting to see if construction increases after interest rates have fallen a few more points, which would make the loans required for large-scale projects more affordable for builders. While Prologis reported increased earnings and revenue in its most recent fiscal quarter, it did warn shareholders that construction may slowdown moving forward in an effort to keep supply at an optimal level. Cushman & Wakefield report that industrial real estate vacancy was up to 6.4% in Q3 – a marked change from the 4.6% vacancy at this time a year ago and the highest level since 2014[16].
In spite of this, Warehousing Utilization is up (+1.9) to 62.9, suggesting that firms are attempting to achieve efficiencies by utilizing as much of their storage as possible. This is necessary because even with some softness in capacity, Warehousing Prices continue to expand (-1.1) at a robust rate of 65.8. Retailers are going about this pursuit of cost savings and efficiency in warehousing in multiple ways. In an effort to achieve $400 million in cost savings, retailer Home Depot is looking to shrink its warehousing portfolio, considering subleasing four buildings one million square foot buildings with a plan to put approximately 4.7 million square feet of real estate on the market[17]. Some savings will continue to come from increasing automation. Amazon’s new model of fulfillment centers will reportedly use 10 times as many robots as previous designs[18]. In other efforts to develop efficiencies in storage, Amazon is experimenting with automated “micro fulfillment centers” attached as appendages to Whole Foods grocery stores, allowing consumers to order groceries and general Amazon items at the same time for pickup[19].
Meanwhile, transportation metrics continue their recent expansionary trend, providing further evidence that the freight market is turning the corner. Transportation Prices were the big mover in October, with the rate of expansion increasing (+5.7) to 64.1 which is their most robust rate of growth since September 2022 over two years ago. These increases come even as fuel costs continue dropping. Diesel fuel prices in the U.S. were up $0.02 per gallon in the last week of October. However, there were down from earlier in the month and down significantly – approximately 88 cents per gallon – from this time a year ago[20]. Transportation Utilization is up as well (+2.1) to 59.7. The increase in utilization is driven significantly more by Upstream firms (62.8) than by Downstream retailers (52.8). Despite the continued turnaround, the most recent round of financial reporting from carriers demonstrates that the freight market is still not fully out of the woods. J.B. Hunt reported decreased profits and revenues in Q3. The decline was driven by slower volumes, but overall revenues came in ahead of analyst’s expectations. Intermodal revenues were unchanged for the quarter at $1.56 billion, with lower drop in per-load revenue offset by a 5% increase in volume[21]. Interestingly, CSX reported increased intermodal activity and revenue over the same period, reporting a 3% increase in volumes and earnings of $894 million in Q3 on revenues of $3.62 billion[22]. Old Dominion and Knight-Swift also reported a decline in earnings. Knight-Swift pointed to the slowdown in East Coast freight stemming for the hurricanes and port strike as one cause of this slowdown. Old Dominion reported a 4.8% decline in LTL freight as the cause behind their first decline in profits and revenues in 2024. Despite the slowdown, analysts are optimistic that the stabilization of freight markets will allow many of these large carriers to secure price increases going forward as we move back towards equilibrium and increased Downstream activity[23]. The validity of this strategy as a playbook for carriers going forward is evident in the price, and ultimately revenue, growth reported by XPO[24]. The U.S. Bank Freight Payment Index suggests that the rate of contraction for freight shipments and spending slowed in Q3, signaling a continued turnaround in the freight market[25].
All of this suggests that the market is turning, just more slowly than carriers would prefer. The reason for this slower turn is that there is more excess capacity in the system than we would normally have. In our previous freight inversions, we have seen available Transportation Capacity begin to contract. That has still not happened during this turnaround. Transportation Capacity has gone down to 50.0 and no movement twice (in July and September) but it has not moved towards contraction. Capacity was slightly up in October (+0.8) to 50.8, which is a very slow rate of expansion but still expansion. The reason this continues to happen is that a significant amount of freight capacity has been sitting idle for the last few years are smaller carriers and owner-operators waited out the freight recession 0f 2022-2024. Now that prices are increasing, more capacity is being enticed back to the market, making this a softer turnaround than the shock-driven freight booms we saw in 2018 (tax cut) and 2020 (COVID lockdowns). The excess capacity is making the recovery slower than some would prefer. But, as we see from future predictions, its slow and steady nature may make the recovery more sustainable.
Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now. Respondents grew increasingly optimistic in October, predicting expansion in the overall index at a rate of 65.7, up slightly (+0.3) from September’s future prediction and slightly above the all-time average of 61.8. This growth is predicted to be driven by Inventory Levels expanding at a rate of 60.7. This robust rate of Inventory Level growth is predicted to cascade outwards, driving forecasted Inventory Costs (68.0), Warehousing Prices (73.5), and Transportation Prices (81.0) up to significant levels of growth. The reading of 81.0 for Transportation Prices would be the highest since early 2022 and signal a move back to a full-fledged freight boom – something that is backed up by the predicted contraction of 45.4 Transportation Capacity.
Researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued this report today.
Results Overview
The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50.0 indicates that logistics is expanding; a reading below 50.0 is indicative of a shrinking logistics industry. The latest results of the LMI summarize the responses of supply chain professionals collected in October 2024.
The LMI read in at 58.9 in October, which is up (+0.3) from September’s reading of 58.6. This is the fastest rate of expansion for the overall index since September of 2022. While this is the 25th consecutive reading below the all-time average of 61.8 for the overall metric, the current trajectory suggests that may not be the case for much longer.
The sustained growth in the LMI over the last few months is reflected in the steady growth of the U.S. economy throughout Q3. The 2.8% growth was driven largely by consumer spending, which was up 3.7% year-over-year (up from the 2.8% y-o-y growth in Q2), as well as an 8.9% growth in exports[1]. The increased consumer spending in Q3 was likely one of the signals firms have relied on in their decisions to increase exports throughout the second half of 2024. Spending may have been driven by the continued deceleration of inflation, as the PCE was only up 1.5% year-over-year in Q3, which is the lowest quarterly rate of inflation growth in four years. Core PCE inflation, which excludes food and energy, read in at 2.2%. Drilling in to a more micro level, core September PCE was up 2.1%, down from the 2.7% growth seen a year ago and essentially in line with the Fed’s stated target of 2% annual growth[2]. There are also some indicators that inflation will continue slowing, as wholesale prices in the U.S. were unchanged month-over-month in September – standing in contrast to the 2.8% increase seen over the same period in 2023. Because wholesale price increases are generally passed down to retailers and consumers, this stabilization may represent some price relief yet to come[3]. In the last week of October, The Conference Board reading of U.S. consumer confidence jumped up to 108.7. This is an increase of 9.5-points which is the largest jump since March of 2021. The proportion of respondents anticipating a recession in the next year also fell to its lowest level since July of 2022 (which was the first month the question was included in the survey)[4].
It was not all positive news in October. The U.S. added only 12,000 jobs which was significantly below expectations and is down from previous months. Transportation and warehousing jobs remained essentially unchanged in October, which is not what one might expect heading into the traditional peak season[5]. This low number was at least partially due to strikes at Boeing, and the aftermath of the two hurricanes that hit the East Coast early in the month[6] and may have cost the economy somewhere around 100,000 jobs[7]. However, even with those anomalies, job growth has been slowing over the last three months, providing another indication that the level of economic growth in the U.S. has moved to a more sustainable level and that interest rates can continue to come down. A big reason for the slowing rates of inflation is how well supply chains are working right now. According to the San Francisco Fed, supply-driven inflation was negative in September, meaning that the abundance of goods such as fuel, consumables, and groceries drove prices down. This marks the third time in the past 10 readings that supply has been deflationary for the U.S. economy[8]. Taken altogether, the news on inflation has caused analysts to expect that the Fed will cut interest rates by another quarter point at their meeting this week and several more times in 2025[9].
The slowing rate of inflation is likely behind the continued strength of the American consumer. Consumer spending is highlighted by Amazon’s robust Q3 numbers, in which they reported $158.9 billion in sales, with much of it driven by greater-than-expected activity in its retail business. Amazon expects continued growth, predicting sales of $188.5 billion in Q4[10]. The retailer’s October Prime Day can be a canary in the coalmine for holiday ecommerce sales. The numbers for the 2024 event were the largest in firm history[11], suggesting that more consumer activity may be on the horizon in Q4. Based on the level of inventories moving around U.S. supply chains it is clear that retailers are expecting strong consumer spending to continue. Inventory Levels continue to grow (-0.4) at a rate of 59.4. These numbers are even strong for Downstream retailers, who reported their most robust expansion of 2024 with a growth rate of 65.7, outstripping their Upstream counterparts (56.3). Interestingly, only a marginal difference exists for Inventory Costs between Upstream (66.4) and Downstream (64.7) firms. The metric continues to grow at 65.8 overall, but at a slightly slower pace (-5.5) than we saw in September.
Our inventory metrics were both significantly more robust in early October. Inventory Levels read in at 66.7 earlier in the month, and then dropped to a slower expansion of 54.1 in the back half. The same was true for Inventory Costs, which read in at 71.4 in early October and then dropped to 61.9 in the second half of the month. When taken together, this suggests that seasonal inventories likely peaked in mid-October and will now come down (while still being continually replenished) due to holiday shopping. This would be consistent with what we saw in the past two years, when seasonal inventory growth peaked in October and then slowed down through November and December. The only time in recent history that this did not happen was in December of 2021, which we now know was a precursor to the inventory bullwhip that staggered retailers in early 2022 and was the genesis of the freight recession.
Inventory growth may slow down, but the JIT-nature of U.S. retail supply chains means that it will still continue to flow in through U.S. ports. TEU volumes coming through the Port of Los Angeles were up 190% year-over-year as more inventory shifted to the West Coast due to the twin hurricanes and 3-day work stoppages that impacted East and Gulf Coast ports early in the month[12]. The increased volume has been good for maritime shippers. Maersk reported revenues of $15.8 billion in the quarter ending on September 30th – up considerable from $12.1 billion reported a year earlier. Container volumes were up 0.3% year-over-year, but it’s annual volumes are up 4-6%[13]. As part of an effort to reduce delivery delays, Maersk and Hapag-Lloyd have announced plans to consolidate loads onto larger ships and to also make fewer stops at ports of call. This plan is set to roll out through their “Gemini” partnership next February. Currently the two shippers provide 55% on-time delivery rates. Their stated goal is to get that number up to 90% through this program[14]. The move to 20,000 container ships will not only provide economies of scale in the sea, but it should also allow for some domestic freight efficiencies.
With the start of the Q4 shopping season, inventories appear to be turning over more quickly, leading to the slow expansion of Warehousing Capacity (-0.1) at 55.8. Continued evidence of moderation in the warehousing industry is seen in reports that developers have pulled back on construction. There was 309 million square feet of warehousing under construction in Q3, which is down 43% year-over-year[15]. This pullback is reflected in the continued growth that we have seen in available Warehousing Capacity over the last year. During the inventory crunch of 2022 facilities could not be built quickly enough, and warehousing under construction averaged nearly 700 million square feet. I today’s more JIT-oriented environment, that level of building is no longer needed. Although it should be acknowledged that the amount of warehousing going up now is similar to what was being built in late 2019, which is likely the last time JIT methods were as prolific as they are today. It will be interesting to see if construction increases after interest rates have fallen a few more points, which would make the loans required for large-scale projects more affordable for builders. While Prologis reported increased earnings and revenue in its most recent fiscal quarter, it did warn shareholders that construction may slowdown moving forward in an effort to keep supply at an optimal level. Cushman & Wakefield report that industrial real estate vacancy was up to 6.4% in Q3 – a marked change from the 4.6% vacancy at this time a year ago and the highest level since 2014[16].
In spite of this, Warehousing Utilization is up (+1.9) to 62.9, suggesting that firms are attempting to achieve efficiencies by utilizing as much of their storage as possible. This is necessary because even with some softness in capacity, Warehousing Prices continue to expand (-1.1) at a robust rate of 65.8. Retailers are going about this pursuit of cost savings and efficiency in warehousing in multiple ways. In an effort to achieve $400 million in cost savings, retailer Home Depot is looking to shrink its warehousing portfolio, considering subleasing four buildings one million square foot buildings with a plan to put approximately 4.7 million square feet of real estate on the market[17]. Some savings will continue to come from increasing automation. Amazon’s new model of fulfillment centers will reportedly use 10 times as many robots as previous designs[18]. In other efforts to develop efficiencies in storage, Amazon is experimenting with automated “micro fulfillment centers” attached as appendages to Whole Foods grocery stores, allowing consumers to order groceries and general Amazon items at the same time for pickup[19].
Meanwhile, transportation metrics continue their recent expansionary trend, providing further evidence that the freight market is turning the corner. Transportation Prices were the big mover in October, with the rate of expansion increasing (+5.7) to 64.1 which is their most robust rate of growth since September 2022 over two years ago. These increases come even as fuel costs continue dropping. Diesel fuel prices in the U.S. were up $0.02 per gallon in the last week of October. However, there were down from earlier in the month and down significantly – approximately 88 cents per gallon – from this time a year ago[20]. Transportation Utilization is up as well (+2.1) to 59.7. The increase in utilization is driven significantly more by Upstream firms (62.8) than by Downstream retailers (52.8). Despite the continued turnaround, the most recent round of financial reporting from carriers demonstrates that the freight market is still not fully out of the woods. J.B. Hunt reported decreased profits and revenues in Q3. The decline was driven by slower volumes, but overall revenues came in ahead of analyst’s expectations. Intermodal revenues were unchanged for the quarter at $1.56 billion, with lower drop in per-load revenue offset by a 5% increase in volume[21]. Interestingly, CSX reported increased intermodal activity and revenue over the same period, reporting a 3% increase in volumes and earnings of $894 million in Q3 on revenues of $3.62 billion[22]. Old Dominion and Knight-Swift also reported a decline in earnings. Knight-Swift pointed to the slowdown in East Coast freight stemming for the hurricanes and port strike as one cause of this slowdown. Old Dominion reported a 4.8% decline in LTL freight as the cause behind their first decline in profits and revenues in 2024. Despite the slowdown, analysts are optimistic that the stabilization of freight markets will allow many of these large carriers to secure price increases going forward as we move back towards equilibrium and increased Downstream activity[23]. The validity of this strategy as a playbook for carriers going forward is evident in the price, and ultimately revenue, growth reported by XPO[24]. The U.S. Bank Freight Payment Index suggests that the rate of contraction for freight shipments and spending slowed in Q3, signaling a continued turnaround in the freight market[25].
All of this suggests that the market is turning, just more slowly than carriers would prefer. The reason for this slower turn is that there is more excess capacity in the system than we would normally have. In our previous freight inversions, we have seen available Transportation Capacity begin to contract. That has still not happened during this turnaround. Transportation Capacity has gone down to 50.0 and no movement twice (in July and September) but it has not moved towards contraction. Capacity was slightly up in October (+0.8) to 50.8, which is a very slow rate of expansion but still expansion. The reason this continues to happen is that a significant amount of freight capacity has been sitting idle for the last few years are smaller carriers and owner-operators waited out the freight recession 0f 2022-2024. Now that prices are increasing, more capacity is being enticed back to the market, making this a softer turnaround than the shock-driven freight booms we saw in 2018 (tax cut) and 2020 (COVID lockdowns). The excess capacity is making the recovery slower than some would prefer. But, as we see from future predictions, its slow and steady nature may make the recovery more sustainable.
Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now. Respondents grew increasingly optimistic in October, predicting expansion in the overall index at a rate of 65.7, up slightly (+0.3) from September’s future prediction and slightly above the all-time average of 61.8. This growth is predicted to be driven by Inventory Levels expanding at a rate of 60.7. This robust rate of Inventory Level growth is predicted to cascade outwards, driving forecasted Inventory Costs (68.0), Warehousing Prices (73.5), and Transportation Prices (81.0) up to significant levels of growth. The reading of 81.0 for Transportation Prices would be the highest since early 2022 and signal a move back to a full-fledged freight boom – something that is backed up by the predicted contraction of 45.4 Transportation Capacity.
A comparison of the feedback from Upstream (blue bars) and Downstream (orange bars) respondents suggest that activity has leveled out across supply chains. Throughout most of the summer, Upstream firms reported expanding Inventory Levels while Downstream respondents reported contraction. That trend finally broke in September, as Downstream firms reported expansion in Inventory Levels at 56.7 to Upstream’s 61.0. That dynamic inverted in October with Downstream Inventory Levels now growth faster than Upstream (65.7 to 56.3) for the first time since March. Despite this flip, both sides are still building up inventories and are seeing very similar increases across all three cost/price metrics. The only statistically significant difference we find is that Upstream rates of Transportation Utilization expanded more quickly (62.8 to 52.8) than Downstream. Even with this marginal difference, this is one of the most Upstream/Downstream comparisons we have seen in 2024, suggesting that the lopsided activity we observed through most of the year has given way to a more balanced logistics industry at the start of Q4 and the holiday shopping season.
Logistics activity may be somewhat uniform now, but that we see in our future predictions from Upstream (green bars) and Downstream respondents (purple bars) that may not be the case over the next 12 months. The most notable difference is in Warehousing Prices, which Upstream firms project to increase at a very robust rate of 78.0 to Downstream’s (still strong) prediction of 64.7. The increase price is tied to Upstream firms anticipating mild contraction in available Warehousing Capacity (49.3) while Downstream firms anticipate moderate expansion (57.4). We see something similar with transportation, with Upstream firms anticipating contraction (43.8) and their Downstream counterparts expecting no change (50.0). All of this stems from Upstream firms predicting a faster rate of expansion in Inventory Levels (63.2) relative to more moderate, and possibly JIT-influenced, expectations of expansion Downstream (55.6). Unsurprisingly, these differences lead to a statistically significantly greater expectation of expansion in the overall index (68.6 to 61.2). These growth rates would put Downstream firms almost right at, and Upstream firms within standard deviation, of the all-time average of 61.8. If these predictions hold, it would indicate strong, but also steady and sustainable, growth in the logistics industry in 2025.
Harking back to the intra-month differences we observed earlier in the year, we see a few sources of difference in respondent feedback between early (gold bars) and late (green bars) in October. We observe higher rates of growth in early October (10/1-10/15) for Inventory Levels, Inventory Costs, and Warehousing Prices. Corroborating this we see that available Transportation Capacity contracted in early October at 45.8 before moving back into expansion at 54.3 later in the month. These have all combined to push the overall index to be significantly different between early (62.4) and late (56.6) October. October has been the busiest month in the overall index for the last two years as it is often the time when retailers kick into high gear ahead of peak season. The marginally significant differences observed between late and early October suggest that this may be the case in 2024 as well.
Harking back to the intra-month differences we observed earlier in the year, we see a few sources of difference in respondent feedback between early (gold bars) and late (green bars) in October. We observe higher rates of growth in early October (10/1-10/15) for Inventory Levels, Inventory Costs, and Warehousing Prices. Corroborating this we see that available Transportation Capacity contracted in early October at 45.8 before moving back into expansion at 54.3 later in the month. These have all combined to push the overall index to be significantly different between early (62.4) and late (56.6) October. October has been the busiest month in the overall index for the last two years as it is often the time when retailers kick into high gear ahead of peak season. The marginally significant differences observed between late and early October suggest that this may be the case in 2024 as well.
We also track differences between the responses of larger firms (those with 1,000 employees or more, represented by gold lines) and smaller firms (those with 0-999 employees, represented by maroon lines). We observe a few significant differences between large and small firms in October, both of which suggest that smaller firms are seeing considerably more movement. This is manifested in the significantly faster expansion of Transportation Prices where smaller firms reported robust expansion at 74.2 and larger firms reported mild growth at 52.7. Interestingly, Transportation Capacity is similarly tight on both sides (slight contraction of 49.2 for small firms and slight expansion of 52.6 for large firms). The similarity in available capacity suggests that the differences in price may be due more to larger firms paying contract prices that are locked in at lower rates while smaller firms with less capacity either have worse rates, or – as is more likely, are utilizing the more expensive spot market to get the capacity they need. The other major difference is in Warehousing Capacity where smaller firms are seeing contraction at 46.4 and large firms expansion at 67.0. It seems likely that this is due to smaller firms and retailers building up inventories for the holiday season while larger wholesalers push inventories downstream and free up capacity.
We also track differences between the responses of larger firms (those with 1,000 employees or more, represented by gold lines) and smaller firms (those with 0-999 employees, represented by maroon lines). We observe a few significant differences between large and small firms in October, both of which suggest that smaller firms are seeing considerably more movement. This is manifested in the significantly faster expansion of Transportation Prices where smaller firms reported robust expansion at 74.2 and larger firms reported mild growth at 52.7. Interestingly, Transportation Capacity is similarly tight on both sides (slight contraction of 49.2 for small firms and slight expansion of 52.6 for large firms). The similarity in available capacity suggests that the differences in price may be due more to larger firms paying contract prices that are locked in at lower rates while smaller firms with less capacity either have worse rates, or – as is more likely, are utilizing the more expensive spot market to get the capacity they need. The other major difference is in Warehousing Capacity where smaller firms are seeing contraction at 46.4 and large firms expansion at 67.0. It seems likely that this is due to smaller firms and retailers building up inventories for the holiday season while larger wholesalers push inventories downstream and free up capacity.
The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. The rate of expansion for the overall index is up (+0.2) to its highest level in two years at 58.9. This is driven by a continued expansion in Transportation Prices (+5.7) which read in at 64.1 and reached their highest level since May of 2022, which was 2.5 years ago. The continued increase in Inventory Levels (particularly Downstream) has led to increasing Warehousing Utilization (+1.9) and Transportation Utilization (+2.1) as firms make a concerted effort to be as efficient as possible with available capacity. Interestingly, capacity does continue to climb for both warehousing (55.8) and very mildly for transportation (50.8). It should be noted though that the reading of 50.8 for Transportation Capacity is very near the breakeven level and may suggest that much of the capacity that will be coming online during Q4 is already here. Whether or not this means that prices will continue to grow remains to be seen.
The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. The rate of expansion for the overall index is up (+0.2) to its highest level in two years at 58.9. This is driven by a continued expansion in Transportation Prices (+5.7) which read in at 64.1 and reached their highest level since May of 2022, which was 2.5 years ago. The continued increase in Inventory Levels (particularly Downstream) has led to increasing Warehousing Utilization (+1.9) and Transportation Utilization (+2.1) as firms make a concerted effort to be as efficient as possible with available capacity. Interestingly, capacity does continue to climb for both warehousing (55.8) and very mildly for transportation (50.8). It should be noted though that the reading of 50.8 for Transportation Capacity is very near the breakeven level and may suggest that much of the capacity that will be coming online during Q4 is already here. Whether or not this means that prices will continue to grow remains to be seen.
Historic Logistics Managers’ Index Scores
This period’s along with prior readings from the last two years of the LMI are presented table below:
This period’s along with prior readings from the last two years of the LMI are presented table below:
LMI®
The overall index reads in at 58.9, up (+0.2) from September’s reading of 58.6. This is the highest reading for the overall index since September of 2022 – the consecutive month that that has been true. For the last two years, October has been the high-water mark for the overall index as supply chains whirl into motion to push inventory downstream to retailers, and then slow back down as they maintain – rather than build – inventories through the rest of the year. We did observe that the overall index slowed down in the back half of the month (down to 56.5 from 62.4 earlier in October), so we may see similar dynamics to 2022-23 in a slowing rate of growth. That being said, the overall market is in a very different place than it was then, so we would not expect a downturn as we have seen in the past, merely a slowed rate of growth.
When asked to predict what conditions will be over the next 12 months respondents foresee a rate of expansion of 65.7, up very slightly (+0.3) from September’s future prediction of 65.4. This prediction is above the all-time average of 61.8, which suggests that 2025 will be a robust year for the logistics industry. Upstream firms are more bullish on future index expansion than their Downstream counterparts (68.6 to 61.2).
The overall index reads in at 58.9, up (+0.2) from September’s reading of 58.6. This is the highest reading for the overall index since September of 2022 – the consecutive month that that has been true. For the last two years, October has been the high-water mark for the overall index as supply chains whirl into motion to push inventory downstream to retailers, and then slow back down as they maintain – rather than build – inventories through the rest of the year. We did observe that the overall index slowed down in the back half of the month (down to 56.5 from 62.4 earlier in October), so we may see similar dynamics to 2022-23 in a slowing rate of growth. That being said, the overall market is in a very different place than it was then, so we would not expect a downturn as we have seen in the past, merely a slowed rate of growth.
When asked to predict what conditions will be over the next 12 months respondents foresee a rate of expansion of 65.7, up very slightly (+0.3) from September’s future prediction of 65.4. This prediction is above the all-time average of 61.8, which suggests that 2025 will be a robust year for the logistics industry. Upstream firms are more bullish on future index expansion than their Downstream counterparts (68.6 to 61.2).
Inventory Levels
The Inventory Level index is 59.4, down very slightly (-0.4) from September’s reading of 59.8. This continues the trend of the last three months which have shown increasing inventories, but prior to that, the index declined in 10 of the previous 15 months. This shift has been driven by a restocking of Downstream retailers. In October, Upstream respondents returned a value of 56.3, while downstream respondents returned a similar value of 65.7, a difference of 9.4. In the last two years we have seen seasonal Inventory Levels peak in October and then decline in November and December. This is what we would expect to happen again if traditional seasonality is indeed back as our respondents have been indicating.
When asked to predict what conditions will be like 12 months from now, the average value is 60.7, down very slightly (-0.3) from September’s future prediction of 61.0. Like last month, Upstream respondents expect a greater rate of expansion (63.2) than their Downstream counterparts (55.6). The lower Downstream value suggests higher rates of turnover consistent with principles of JIT.
The Inventory Level index is 59.4, down very slightly (-0.4) from September’s reading of 59.8. This continues the trend of the last three months which have shown increasing inventories, but prior to that, the index declined in 10 of the previous 15 months. This shift has been driven by a restocking of Downstream retailers. In October, Upstream respondents returned a value of 56.3, while downstream respondents returned a similar value of 65.7, a difference of 9.4. In the last two years we have seen seasonal Inventory Levels peak in October and then decline in November and December. This is what we would expect to happen again if traditional seasonality is indeed back as our respondents have been indicating.
When asked to predict what conditions will be like 12 months from now, the average value is 60.7, down very slightly (-0.3) from September’s future prediction of 61.0. Like last month, Upstream respondents expect a greater rate of expansion (63.2) than their Downstream counterparts (55.6). The lower Downstream value suggests higher rates of turnover consistent with principles of JIT.
Inventory Costs
Inventory costs read in at 65.8, down ( -5.5) from September’s reading of 71.3 – which was the highest rate of expansion for this metric since February of 2023. The current value is 4.0 points lower than last year, and 15.1 points lower than two years ago, when many firms were over-stocked. Upstream and Downstream respondents returned similar values, 66.4 for Upstream and 64.7 for Downstream which are both robust rates of expansion. Inventory Costs were significantly higher earlier in the month, reading in at 71.4 in early October and then dropping to 61.9 in the second half of the month. This lines up with the slight slowdown we saw for Inventory Levels. When take together, this suggests that seasonal inventories likely peaked in mid-October, and will now come down (while still being continually replenished) due to holiday shopping.
Predictions for future Inventory Cost growth is 68.0, down (-2.9) from October’s future prediction of 70.9. Upstream future predictions averaged 69.4, up slightly from the Downstream expectation of 65.3, suggesting that firms across the supply chain are expecting Inventory Costs growth that is fairly robust, but not unsustainable, in 2025
Inventory costs read in at 65.8, down ( -5.5) from September’s reading of 71.3 – which was the highest rate of expansion for this metric since February of 2023. The current value is 4.0 points lower than last year, and 15.1 points lower than two years ago, when many firms were over-stocked. Upstream and Downstream respondents returned similar values, 66.4 for Upstream and 64.7 for Downstream which are both robust rates of expansion. Inventory Costs were significantly higher earlier in the month, reading in at 71.4 in early October and then dropping to 61.9 in the second half of the month. This lines up with the slight slowdown we saw for Inventory Levels. When take together, this suggests that seasonal inventories likely peaked in mid-October, and will now come down (while still being continually replenished) due to holiday shopping.
Predictions for future Inventory Cost growth is 68.0, down (-2.9) from October’s future prediction of 70.9. Upstream future predictions averaged 69.4, up slightly from the Downstream expectation of 65.3, suggesting that firms across the supply chain are expecting Inventory Costs growth that is fairly robust, but not unsustainable, in 2025
Warehousing Capacity
The Warehousing Capacity index remained relatively unchanged, only decreasing by 0.1 points in the month of October, and remained in expansionary territory (55.8), as has been the case since April of 2024. This reading is down 1.2 points from the reading one year ago, and also up a considerable 11.1 percentage points from the reading two years ago. In addition, there was a 0.3-point split between upstream (55.7) and downstream (56.1) which was not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999) employees we see that these values are 46.4 and 67.0, respectively. This 20.6-point split was statistically significant (p <.01).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Capacity to expand at a rate of 51.9, down (-4.1) from September’s future prediction of 56.0. A rate of 51.9 would be only marginally expansionary, suggesting that available Warehousing Capacity would be tight, potentially leading to higher levels of growth. This would be consistent with anecdotal reports that industrial real estate firms are looking to slow their rates of growth to right-size portfolios in 2025. Upstream respondents actually expect Warehousing Capacity to decline (49.3), while Downstream respondents expect a bit more wiggle room with mild expansion (58.3).
The Warehousing Capacity index remained relatively unchanged, only decreasing by 0.1 points in the month of October, and remained in expansionary territory (55.8), as has been the case since April of 2024. This reading is down 1.2 points from the reading one year ago, and also up a considerable 11.1 percentage points from the reading two years ago. In addition, there was a 0.3-point split between upstream (55.7) and downstream (56.1) which was not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999) employees we see that these values are 46.4 and 67.0, respectively. This 20.6-point split was statistically significant (p <.01).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Capacity to expand at a rate of 51.9, down (-4.1) from September’s future prediction of 56.0. A rate of 51.9 would be only marginally expansionary, suggesting that available Warehousing Capacity would be tight, potentially leading to higher levels of growth. This would be consistent with anecdotal reports that industrial real estate firms are looking to slow their rates of growth to right-size portfolios in 2025. Upstream respondents actually expect Warehousing Capacity to decline (49.3), while Downstream respondents expect a bit more wiggle room with mild expansion (58.3).
Warehousing Utilization
The Warehousing Utilization index registered in at 62.9 for the month of October 2024, reflecting a 2.0-point increase from the month prior. This reading is down 4 points from the reading one year ago, and up by 2.1 percentage points the reading two years ago. In addition, there was a 0.6*point split between upstream (62.7) and downstream (63.2) which was not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999) employees we see that these values are 61.6 and 64.3, respectively. This 2.7-point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Utilization to increase at a rate of 69.0, down slightly (-0.8) from September’s future prediction of 70.7. Future Upstream expectations read in at 67.9, only slightly lower than the 71.4 predicted by their Downstream counterparts.
The Warehousing Utilization index registered in at 62.9 for the month of October 2024, reflecting a 2.0-point increase from the month prior. This reading is down 4 points from the reading one year ago, and up by 2.1 percentage points the reading two years ago. In addition, there was a 0.6*point split between upstream (62.7) and downstream (63.2) which was not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999) employees we see that these values are 61.6 and 64.3, respectively. This 2.7-point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Utilization to increase at a rate of 69.0, down slightly (-0.8) from September’s future prediction of 70.7. Future Upstream expectations read in at 67.9, only slightly lower than the 71.4 predicted by their Downstream counterparts.
Warehousing Prices
The Warehousing Price index registered in at 65.8 for the month of October 2024, which is down by 1.1 points from the month prior. This reading is down from the reading one year ago (by 4.9 points), and down 4.7 points from the reading two years ago. In addition, there was a trivial (0.3) point split between upstream (65.9) and downstream (65.6) which is not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999) employees we see that these values are 68.9 and 62.2 respectively. This 6.7 percentage point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Prices to increase at a rate of 73.5, down slightly (-0.8) from September’s future prediction of 74.3. We would classify this as a significant level of expansion. This expansion is driven more by Upstream firms, who anticipate very robust expansion at 78.0 to the strong but more muted expansion of 64.7 predicted Downstream. While all respondents are predicting robust expansion, this 13.3-point difference is statistically significant.
The Warehousing Price index registered in at 65.8 for the month of October 2024, which is down by 1.1 points from the month prior. This reading is down from the reading one year ago (by 4.9 points), and down 4.7 points from the reading two years ago. In addition, there was a trivial (0.3) point split between upstream (65.9) and downstream (65.6) which is not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999) employees we see that these values are 68.9 and 62.2 respectively. This 6.7 percentage point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Prices to increase at a rate of 73.5, down slightly (-0.8) from September’s future prediction of 74.3. We would classify this as a significant level of expansion. This expansion is driven more by Upstream firms, who anticipate very robust expansion at 78.0 to the strong but more muted expansion of 64.7 predicted Downstream. While all respondents are predicting robust expansion, this 13.3-point difference is statistically significant.
Transportation Capacity
The Transportation Capacity Index registered 50.8 in October 2024. This constitutes a small increase of .8 percentage points from last month’s reading. As such, the Transportation Capacity index manages to stay (barely) above the critical threshold. There is no significant difference between Upstream and Downstream, with Upstream Transportation Capacity index at 50.6 and the Downstream index at 51.4. As such, the very small expansion in Transportation Capacity is present both Upstream and Downstream, across the supply chains.
The future Transportation Capacity index is also up slightly, now at 45.7 and continuing to indicate expectations of slight contraction in Transportation Capacity over the next 12 months. While the Upstream index is at 43.8, and the Downstream Transportation Capacity index is 50.0, with the difference not being statistically significant.
The Transportation Capacity Index registered 50.8 in October 2024. This constitutes a small increase of .8 percentage points from last month’s reading. As such, the Transportation Capacity index manages to stay (barely) above the critical threshold. There is no significant difference between Upstream and Downstream, with Upstream Transportation Capacity index at 50.6 and the Downstream index at 51.4. As such, the very small expansion in Transportation Capacity is present both Upstream and Downstream, across the supply chains.
The future Transportation Capacity index is also up slightly, now at 45.7 and continuing to indicate expectations of slight contraction in Transportation Capacity over the next 12 months. While the Upstream index is at 43.8, and the Downstream Transportation Capacity index is 50.0, with the difference not being statistically significant.
Transportation Utilization
The Transportation Utilization Index is up 2.1 points from last month, indicating 59.7 in October 2024. With this increase, albeit a small one, the Transportation Utilization index is at the highest level recorded in the last year, mirroring the seasonal increase from a year ago. The expansion is felt across the supply chain, with the Downstream Transportation Utilization Index reading 52.8, while the Upstream index is indicating 62.8. This difference is marginally statistically significant, indicating that the activity increase is more intense Upstream than Downstream.
The future Transportation Utilization Index increased 4.4 points from the last reading and continues to indicate expansion at 70.9 for the next 12 months. The future Upstream Transportation Utilization index is at 73.5 while the Downstream index is at 65.3. The difference is not statistically significant.
The Transportation Utilization Index is up 2.1 points from last month, indicating 59.7 in October 2024. With this increase, albeit a small one, the Transportation Utilization index is at the highest level recorded in the last year, mirroring the seasonal increase from a year ago. The expansion is felt across the supply chain, with the Downstream Transportation Utilization Index reading 52.8, while the Upstream index is indicating 62.8. This difference is marginally statistically significant, indicating that the activity increase is more intense Upstream than Downstream.
The future Transportation Utilization Index increased 4.4 points from the last reading and continues to indicate expansion at 70.9 for the next 12 months. The future Upstream Transportation Utilization index is at 73.5 while the Downstream index is at 65.3. The difference is not statistically significant.
Transportation Prices
The Transportation Prices Index indicates 64.1 in October 2024, which corresponds to a jump of 5.7 points from the previous month. With this jump, the downward trend is broken, and the Transportation Prices index reaches its highest level in two years. While the Upstream Transportation Prices Index is at 63.0, the Downstream index is at 66.7, yet the difference is not statistically significant.
The future index for Transportation Prices also increased 1 point and is now at 81.0. As such, the index continues to indicate strong expectations of higher Transportation Prices in the next 12 months. The Downstream Transportation Prices index is at 78.4 while the Upstream Transportation Prices index is at 82.3, but the difference is not statistically significant.
The Transportation Prices Index indicates 64.1 in October 2024, which corresponds to a jump of 5.7 points from the previous month. With this jump, the downward trend is broken, and the Transportation Prices index reaches its highest level in two years. While the Upstream Transportation Prices Index is at 63.0, the Downstream index is at 66.7, yet the difference is not statistically significant.
The future index for Transportation Prices also increased 1 point and is now at 81.0. As such, the index continues to indicate strong expectations of higher Transportation Prices in the next 12 months. The Downstream Transportation Prices index is at 78.4 while the Upstream Transportation Prices index is at 82.3, but the difference is not statistically significant.
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