The July Logistics Manager Index (LMI) shows trucking capacity contracting at a faster rate into peak season, with spot rates slipping while truckload contract rates remain 18% above year-ago levels, according to an Aug. 5 Sonar market update from FreightWaves analyst Julie.
The LMI registered 68.9% in July, down from 71.7% in June but still nearly 7 points above the index's all-time average of 61.7%. The three-month average stood at 69.8, placing July 0.9 points below that trend; the all-time low is 45.4 and the all-time high is 76.2, Julie reported.
July LMI: Expansion Continues at a Slower Pace
Aggregate logistics costs dipped slightly from 242.1 to 239.5 in July, though the LMI's projected direction still points to expansion at a slower pace. Inventory levels slipped more than 5 points, from 60.5 to 55.0, while the projected direction for inventories indicated future expansion at a faster rate of change. Warehousing capacity edged lower from 47.5 to 46.3, and warehousing pricing climbed from 73.8 to 75.5.
Capacity, Utilization, and Rates at a Glance
Transportation capacity was among the sharpest movers, sliding from 30.8 in June to 28.4 in July — a decline of roughly 2.5 points — with the directional indicator showing contraction at a faster rate of change, according to Julie. Transportation utilization fell even more steeply, dropping 9.7 points from 74.7 to 65.0, though the projected direction remained expansionary. Transportation pricing eased from 92.4 to 86.9, consistent with softening in the national spot rate index.
| Metric | June | July | Change |
|---|---|---|---|
| LMI overall | 71.7 | 68.9 | -2.8 |
| Transportation capacity | 30.8 | 28.4 | -2.4 |
| Transportation utilization | 74.7 | 65.0 | -9.7 |
| Transportation pricing | 92.4 | 86.9 | -5.5 |
| Inventory levels | 60.5 | 55.0 | -5.5 |
| Warehousing capacity | 47.5 | 46.3 | -1.2 |
| Warehousing pricing | 73.8 | 75.5 | +1.7 |
| Aggregate logistics costs | 242.1 | 239.5 | -2.6 |
Spot Rates Slide While Contract Rates Hold
On the spot rate side, FreightWaves' NTI USA index declined to $3.47, off about 7.5% month over month, while the STRI.US tender rejection index dipped to 13.84%, down 2.74% from the prior month. Truckload contract rates, tracked by VCRPM1.USA, held at $271 plus fuel and remained 18% above year-ago levels — a dynamic the analyst said is pulling more freight back into routing guides and compressing rejection rates.
As contract rates rise, mini bids and new bid cycles are executed, routing guides are standing up, more contract freight is being accepted at those newly agreed-upon increased contract rates, which then causes those tender rejections to normalize a bit and fall. — FreightWaves analyst Julie
Enforcement Adds Pressure
Adding pressure to available capacity, the U.S. Department of Transportation's Operation Highway Shield — a coordinated enforcement effort involving DHS, FMCSA, and state agencies — conducted a three-day blitz through the Midwest in late July, according to the FreightWaves update. The operation pulled more than 750 unsafe trucks or drivers from the road, detained 51 people on immigration violations, and cited 36 English-language proficiency violations. The analyst noted the multi-agency crackdown represents an ongoing regulatory push that creates additional barriers to entry and could further support spot rates.
Shipper and Operator Implications
For shippers and operators, the July LMI points to a tightening truckload market entering peak season. Contract rates tracked by VCRPM1.USA remain 18% above year-ago levels, and the movement of freight back into routing guides is compressing tender rejections, according to Julie. Meanwhile, enforcement activity is removing capacity from the road, and the analyst said capacity is unlikely to re-enter the market at scale. Freight forwarders and 3PL operators should expect continued pressure on spot rates and tighter equipment availability as contract freight absorbs more of the available truckload capacity.
Watch List
- Enforcement calendar: Road Check and other safety enforcement activity could further constrain capacity, according to the FreightWaves analyst, who forecast continued tightening through the last week of August.
- LMI details: A more detailed breakdown of the July LMI is scheduled for presentation Thursday on the Freightonomics segment, featuring LMI co-author Dr. Zach Rogers alongside Zach Strickland.
- Rate direction: With transportation pricing easing and the national spot rate index softening, the interplay between contract and spot rates will determine whether rejections continue to normalize.
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