October LMI: transportation capacity contracts for an 11th straight month at 38, prices read 88, and new truckload contracts are resetting about 13% higher

The monthly survey behind much of the freight industry’s rate talk landed Tuesday, and it says the squeeze is not easing. The Logistics Managers’ Index, released Tuesday, showed transportation capacity contracting for an 11th straight month in October, transportation prices expanding at a highly significant rate, and inventories surging ahead of the holidays, according to FreightWaves on Nov. 3. The LMI’s transportation capacity reading was 38 in October — deep in contraction on an index where a reading above 50 indicates expansion and below 50 signals contraction — even though the pace of decline was 3.6 points slower than in September.

The headline index tells the demand side. The overall LMI rose to 70.7 in October, up 50 basis points from 70.2 in September, to the second-highest level in over four years; only June’s 71.1 reading was higher. Year to date, the index average is the second-highest in the dataset’s 10-year history and approximately 9 points above last year. This is not a market waiting for volume: activity is already running hot, and the constraint is the supply of trucks and warehouse space.

Inside transportation, utilization kept rising even as capacity kept shrinking. Transportation utilization read 63.5, continuing to increase but at a pace 2.6 points slower than the month before. Upstream companies — manufacturers and wholesalers — returned a 69.3 utilization reading, 16 points higher than downstream retailers: freight is being worked hardest at the production end, not the store end. Transportation prices read 88, continuing to expand at what the report calls a highly significant rate, though at a pace 4.7 points slower than in September. The report notes diesel prices were down 1% sequentially during October but up 70% year over year — a small monthly break on top of an enormous yearly increase.

The inventory build is the newest pressure. October inventory levels read 66.9, jumping 8 points from September and logging the fastest growth rate in four years, and the build accelerated through the month: the second-half growth rate was 72.1, approximately 10 points higher than the first half. “After a year of playing things very cautiously due to doubts about the consumer and the high costs of tariffs and transportation, firms are now pulling inventories in as quickly as they can – often at high costs – in an effort to capitalize on what they hope will be a blockbuster holiday season,” the report said. Storing that surge is expensive: Inventory Costs read 88.8, up 8.9 points to the highest reading for the dataset since March 2022.

Warehousing shows the same pattern. Warehouse capacity read 43.5: the rate of decline slowed 4.2 points, but the index stayed firmly in contraction, where it has been in six of the past eight months; upstream companies reported severe contraction at 37.5. Warehouse prices surged 7.2 points to 80.7. Add the three cost families together and the total is the report’s loudest number: aggregate logistics costs totaled 257.5, up 11.4 points sequentially, the fastest growth rate since March 2022, and 55 points higher than a year ago. The researchers warned the pressure may foreshadow continued supply-driven inflation.

Carriers are carrying this survey into bid season. Knight-Swift Transportation, which has roughly 70% of its truckload fleet operating under non-dedicated agreements, is targeting at least double-digit rate increases in the annual contractual negotiations that have just begun. It leaned into the spot market earlier this year, which led to tender rejections two to three times higher than the industry average during the third quarter, and it is seeing the most peak-season project freight in its network since the pandemic. FreightWaves’ chart of SONAR contract data points the same direction: recent contract renewals are averaging 13% above the rates they replace. A widespread crackdown on noncompliant capacity has carriers betting the recovery is just beginning, and some recently said they would look to grow their one-way fleets after years of repositioning that equipment under dedicated agreements or disposing of it.

The survey’s forward look offers shippers little comfort. Logistics managers expect the market to remain very tight over the next 12 months, returning future readings of 49.3 for capacity, 67.6 for utilization and 90 for pricing. Capacity contraction is expected to slow — September’s outlook was 37.9, well below the new 49.3 — but rates are expected to surge faster, with the pricing forecast up 3.9 points. Buyers expect the truck shortage to ease only slightly while the price of a truck keeps climbing.

The LMI is a collaboration among Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University and the University of Nevada, Reno, conducted with the Council of Supply Chain Management Professionals. For a driver or a small fleet, the usable read is this: the tightness behind this fall’s rate gains is measured, not anecdotal — an 11th straight month of contracting capacity, prices at 88, and renewals resetting about 13% higher. The risk is demand: inventories pulled in “at high costs” for a holiday season firms only hope will be a blockbuster. If that freight sells through, the squeeze carries into 2027 and the bid-season increases stick. If it does not, warehouses will be working off stock in January while carriers defend rates they just won. Either way, negotiate as if 90 is the pricing expectation — because in this survey, it is.