The minimal overall increase of the August Logistics Managers' Index is the product of counteracting forces at the sub-component level, according to researchers.
The index reads in at 59.3, up very slightly (+0.1) from July’s reading of 59.2.
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 the report on September 2.
The upward pressure comes from inventory and warehousing metrics. Inventory level expansion is up (+2.7) to 58.2, which in turn is pushing up inventory costs (+7.3) to 79.2 and warehousing prices (+3.9) to 72.2.
The report also notes that warehousing capacity expansion slowing (-0.6) to 50.5, which is just above the break-even of 50.0 and represents very marginal rates of expansion.
The downward pressure comes from our transportation metrics, the authors conclude. There were notable drops in both transportation prices (-6.9 to 56.1) and transportation utilization (-4.8 to 54.7).
At the same time, available transportation capacity is up (+4.7) to 57.3. While these are not necessarily seismic shifts on their own, the authors say, the fact that transportation capacity is now expanding faster than transportation prices is significant as it represents a mild negative freight inversion.
In the past, negative freight inversions have been associated with a move towards slowdowns in the transportation market.
The report offers the following analysis:
As is clear from the chart, however, the August inversion is fairly mild (1.2-point difference) and it is only one reading. Traditionally, a move like this would need to go on for at least three months before we began to consider it an actual freight recession.
It does however represent the continuation of a trend that we have been observing since January when Transportation Prices came in 17.7 points higher than available Transportation Capacity during the beginning of the big stock-up ahead of tariffs.
Transportation prices had been higher than transportation capacity in every reading since April of 2024, which marked the end of the previous freight recession. Up until January of this year, it seemed that freight metrics were trending up strongly, and that we might begin moving towards a strong expansionary period like those seen in 2017-2018 and 2020-2021.
The fact that we have moved towards a negative inversion in August, at the start of what should normally be peak season, renders the chances of a boom market happening any time soon as fairly unlikely.
Again, this does not mean that we will slide into a freight recession, and respondent future predictions actually point to that not happening. This is a marked shift, however, and it will be critical to continue monitoring movements in these metrics as transportation often acts as a leading indicator for the overall economy.
