Freight Capacity Plummets as Rates Hit 2-Year Highs

Key Details The Logistics Managers' Index revealed extreme market tightening in March, mirroring conditions last seen during the Covid freight boom. Capacity contracted to 39.2 while pricing surged to 89.4, creating the widest capacity-pricing gap since November 2021. Capacity fell for the fourth consecutive month, dropping 1.8 points. Pricing jumped 12.7 points to its fastest growth rate since March 2022, with the surge accelerating in the final two weeks of the month. Why It Matters New regulatory enforcement is significantly reducing available truck capacity. English-language proficiency requirements, CDL restrictions on non-domiciled drivers, ELD provider crackdowns, and driver school closures are all contributing to the tight supply. Small carriers are being hit harder, with pricing sentiment at 92.7 compared to 84.7 for large companies. Logistics managers expect the market to remain extremely tight over the next 12 months, forecasting capacity of 34.9 and pricing of 93. Cost Pressures Inventory costs accelerated sharply, rising 8.4 points to 76.2 in March. High interest rates and warehouse rents are forcing companies to adopt just-in-time strategies rather than stockpiling, a shift from pandemic-era practices. Large firms reporting inventory costs of 82.8 are scaling back merchandise levels despite elevated carrying expenses.