Transportation prices jumped in January, according to a monthly survey of supply chain managers. The Logistics Managers’ Index released Tuesday showed sentiment around transportation rates was at the highest level since April 2022 – the start of the freight recession.
A 70.4 reading for pricing was 3.5 percentage points higher than in December. The subindex has been in expansion territory for 12 of the past 13 months.
The LMI is a diffusion index wherein a reading above 50 indicates expansion while one below 50 signals contraction. The report classifies a reading above 70 as “significant growth.”
Transportation capacity (52.6) was down 50 basis points from December while utilization (60.1) was off 40 bps. The capacity subindex still hasn’t posted a contractionary reading since March 2022. Utilization was nearly 11 points higher in the second half of January.
“It will be interesting to see if these heightened levels of expansion continue into February. If it does, it would be another point of data suggesting a burgeoning freight market,” the report said.
The 12-month forward outlook from respondents calls for transportation capacity to be neutral at 50 while utilization (73.1) continues to step higher and prices (81.1) surge.
“The move above 70.0 for prices suggests that we may now see the freight market move into a stronger position for carriers,” the report said.
Fourth-quarter commentary from management teams provided last week indicated the truckload market has reached an inflection. Carrier Schneider National (NYSE: SNDR) believes the tide has turned as spot rates have remained above contract rates since Thanksgiving while spot broker Landstar System (NASDAQ: LSTR) said fundamentals reflect the end of one cycle and the beginning of another.
The overall LMI registered a 62 reading in January, up 4.7 points sequentially and the fastest growth rate since June 2022.
The index is expected to stand at 66.1 one year from now. However, the report noted that uncertainty around trade policy presents a potential headwind as some firms have indicated they are “considering stopping orders for a short time in hopes that the tariffs will quickly pass.”
Inventory levels (58.5) saw an 8.5-point sequential jump with downstream retailers (56.1) reporting a 22.2-point increase from a deeply contractionary 33.9 reading during the December holiday spending season. Merchandise levels were replenished in the back half of January as the subindex increased from a neutral 50 reading in the first half of the month to a 63.3 level in the last two weeks.
Respondents expect inventories to be elevated one year from now, returning a forecast of 64.1. The report said some companies plan to hold on to more merchandise moving forward due to “still quite healthy consumer demand,” tariff concerns and rising transportation costs.
Higher inventory levels pushed inventory costs (70.2) up 8.6 points and back above 70 for the second time since February 2023.
The warehousing subindexes were also impacted by the change in inventories. Capacity (51.7) fell 5.2 points as warehouse utilization (68.3) moved 6.6 points higher, resulting in a 5.1-point increase to prices (73.1).
All LMI cost and pricing readings were above 70 for the first time since the beginning of the freight recession.
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.
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