The Logistics Managers' Index for October, released Tuesday, recorded a transportation capacity reading of 38, the 11th consecutive month of contraction. The pace of decline was 3.6 percentage points slower than in September. The index is a diffusion measure in which readings above 50 indicate expansion and readings below 50 indicate contraction.

Transportation utilization registered 63.5, still rising but 2.6 points slower than the prior month. Transportation prices registered 88, 4.7 points slower than September but still expanding at a highly significant rate. Diesel fuel prices were down 1% from the prior month and up 70% from a year earlier. The overall index reached 70.7, up 50 basis points and the second-highest reading in more than four years.

Inventory levels jumped 8 points to 66.9, the fastest growth in four years, and inventory costs reached 88.8, the highest since March 2022. Aggregate logistics costs totaled 257.5, up 11.4 points from September.

Carriers reporting third quarter results have signaled double-digit rate increases in the coming contract bid season. Knight-Swift Transportation (NYSE: KNX), which runs roughly 70% of its truckload fleet under non-dedicated agreements, is targeting at least double-digit increases in negotiations that have started. Its tender rejections ran two to three times the industry average during the third quarter after the company leaned into the spot market earlier this year. Knight-Swift also reported the most peak-season project freight in its network since the pandemic.

The SONAR contract rate change direction chart published with the report shows a reading of 12.85%, compared with a 3.47% average over the period charted. Logistics managers surveyed expect transportation capacity at 49.3, utilization at 67.6 and pricing at 90 over the next 12 months.

Source: FreightWaves - https://www.freightwaves.com/news/holiday-inventory-surge-supportive-of-double-digit-plus-tl-contract-rates