Capacity Contracts for 11th Month as Spot Rates Jump 47%

Transportation capacity has now contracted for 11 consecutive months, with the October Logistics Managers Index reading 38 — down sharply from 54.5 a year ago and far below the 50-point line that separates growth from shrinkage.

The reading landed Nov. 3, the same morning as October's ISM Manufacturing PMI, and the two reports tell one story: demand keeps building while capacity keeps falling short. The overall LMI climbed to 70.7 in October, up from 70.2 in September and 13.3 points above the 57.4 posted last October. That makes it the second-highest reading in four years.

Transportation prices were the sharpest mover in the index. That component surged from 61.7 last October to 88 this October, and respondents expect it to push above 90 within the next 12 months. In plain terms, the people who buy freight daily see no relief coming.

"Transportation capacity is at 38. It's continuing to sit in that contraction portion of the report at under 50 for the 11th straight month," said Julie Van de Kamp. "A year ago it was at 54.5. All the way down to 38 this month."

What does this mean for rates?

The rate evidence is blunt. Spot rates are up nearly 47% year over year. Contract rates are up nearly 20% and sitting at a 52-week high. New truckload contracts, per LMI-cited Sonar data, are being written 13.11% above the rates they replace — a mechanical escalator for shipper budgets as older agreements roll off.

"The LMI report does cite Sonar data showing new truckload contracts are up 13.11% over the contract rates that they are replacing," Van de Kamp said. "So more evidence that we are going to continue to see increased rates as we get into 2027."

Diesel compounds the problem. It remains above $6 a gallon, a 71% year-over-year increase that lands on every linehaul, whatever the mode feeding the truck.

The Sonar Tender Rejection Index corroborates the squeeze. It stood at 12.86% on Nov. 3, with October averaging about 13.5% against 5.73% in October of the prior year — carriers saying no more than twice as often as a year ago. Tender volume ran roughly 7% higher year over year in October. More freight, fewer takers. The math writes itself.

Is manufacturing adding fuel?

The ISM Manufacturing PMI printed 55.5 in October — a full point above expectations and the 10th straight month of expansion. Production sits at 59, its highest level in five years. Customer inventories remain at 41.6, a level the ISM continues to characterize as too low, which points to sustained production and freight demand ahead.

The ISM's prices index held at 75.2, with respondents citing pricing volatility, extended lead times, tariffs, the Iran war and elevated diesel costs as primary concerns.

Inventory behavior on the LMI side tells the same story from the warehouse door. Inventory levels registered 66.9, the fastest build since September 2022, suggesting retailers may be making a late push to stock for the holiday season — a dynamic that aligns neatly with the ISM's too-low inventory signal.

Aggregate logistics costs rose to 257.5 in October from 246 in September, the highest reading since March 2022. For shippers, that is the summary line: everything measured — moving, storing, fueling — costs more than it has in roughly two and a half years.

How long does the squeeze last?

Van de Kamp expects capacity to remain constrained "certainly into 2027." With capacity in its 11th month of contraction, spot rates up almost half year over year, and respondents forecasting transportation prices above 90, the practical planning assumption for shippers and forwarders is a tight, expensive network through 2024 and beyond.