Latest / Freightvine / Zac Rogers, CSU and Dale Rogers, ASU | 10 Years of the Logistics Manager’s Index
Transcript
- Chris Caplice: Hello and welcome the Freightvine Podcast, your source for all things freight transportation. I'm Chris Caplice Chief Scientist at DAT Freight and Analytics, and today I'm joined by that father and son team, the only one in the industry, Professors Dale and Zac Rogers. And they're here to celebrate a major milestone. It's the tenth anniversary of the Logistics Managers Index or the LMI. And if you really want to know where the economy is headed, this is the pulse, this is the metric that you should probably follow. And as Dale explains, before any product is ever counted in the GDP, it first must move on a truck, a train, a ship, or spend some time in a warehouse. And that's what this measures. Now the LMI is a consensus metric. It leverages the wisdom of the crowd by surveying high-level logistics directors on eight key components that include transportation, warehousing, and inventory. The LMI itself is a scale from zero to one hundred, where anything above a fifty indicates expansion of that metric. And below 50 indicates contraction. recently the transportation price metric, one of the KPIs within the LMI, reached 96. Remember, it only goes from zero to one hundred, right? So this is essentially a unanimous agreement across the survey respondents on the rising nature of transportation prices. And this is a level Zac says is essentially unprecedented in the index's history. You have that much consensus. we also explore the divergence in inventory management. Zac and Dale note that retailers are acting like the hare, rapidly shifting strategies to stay lean, while manufacturers are playing the tortoise, maintaining steady stocks to avoid the critical component shortages that burned them during the pandemic. Finally, we discussed the massive impact of data center construction, which has propped up the vast majority of economic growth in the second quarter of 2026. From the tightest transportation capacity in a decade to the looming uncertainty of global tariffs. This conversation provides you the insights needed to navigate the second half of the year and beyond. following my conversation with Zac and Dale, I'll present the truckload market updates. So let's get started. Hi, Zack and Dale. Welcome back to the Freightvine Podcast. Dale Rogers: Great to be with ya. Zac Rogers: Yeah, thanks for having us. Chris Caplice: Yeah, you're you're still my only father son team who I've had on as as guests together. So we'll have to keep the streak going. But I think it's been a couple of years. I think it's been like maybe three or four years since I last had you on. And the LMI has been doing some crazy stuff lately, so I thought I'd bring you back on. So to start Dale, could you just give us a background of how the LMI was founded and quick overview of what it does just to set the stage? Dale Rogers: Yeah, I'll try to not make it a long story. I I sometimes I can make it a long story, but Chris Caplice: Yeah, I've heard that. I've heard that about you. Dale Rogers: yeah, yeah. But the idea is that before something goes into GDP, you know, economists love to think about gross domestic product, but before something goes into GDP, it goes on a truck, a train, a ship. It goes in a warehouse, it's counted as inventory. And so if you look at those components and we look at eight of them and then we calculate a logistics manager's index number out of those eight components, transportation pricing, capacity utilization, same stuff with warehousing and then inventory cost and amount. And and if you look at those things, you can kind of see the future a little bit. And it's actually worked out that you can see the future if you look at what's happening with stuff that's going on trucks and in warehouses and so on. because because certainly for the good side of the economy, and a lot of the economy is services, but if for the good side of the economy, it's very predictive. And then even for the services, because the logistics services are kind of a microcosm of of total services. So it it's it's been It's been a idea I had for a very long time and my son has actually actualized it and made it better than I thought it could ever be. and it's actually been more accurate and predictive than I would have even guessed going back all those years when I would talk about it at the dinner table when Zac was growing up. Chris Caplice: So it's it's a scale from zero to one hundred, right? And generally it's more of a directional indicator. So below fifty means it's contracting, greater than fifty means it's expanding. Is that is that correct, Zac? Zac Rogers: Yeah, and it and it also shows magnitude. So the the further above fifty it is, the faster the rate of of positive expansion, further below the faster the rate of of contraction. Chris Caplice: And it's it's based off of surveys. Zac Rogers: Yeah, so we we send this survey out to a whole bunch of people. some who who, you know, through our our sort of cooperation with CSCMP we talk with Chris Caplice: Sure. Zac Rogers: and then also some who have just sort of come to the index I don't know how many emails we get every day of people saying, Hey, can you send us the stuff? and it's nice because we've sort of had people just added to the respondent list just because they've read it and and thought it was good. so we try to limit the respondent base to folks who are sort of director level and above so that we're getting a really high level view. you know, because it's cause it's unlikely that someone who's, you know, warehouse manager like I used to be, I might know about the inventory levels in here, but I'm not gonna Chris Caplice: Yeah, Zac Rogers: I don't know what transportation capacity even is. and so we try to get folks who who have a wider ranging sort of twenty thousand foot view of of their supply chains. And and really what we do is we leverage the wisdom of the crowd, basically. you know, everything I think one of the reasons that it has been as accurate and insightful as it has been is because, you know, if you just ask two hundred really smart people, hey, what's going on at work and you average it together, you get a pretty good picture of of what's going on. Chris Caplice: do you track the Dale Rogers: It works very similar, truthfully, to the purchasing managers index. It's just that we're looking at the logistics components and you know one of the the inventors, the main inventor of the of the PMI was a professor of mine at Michigan State, Dr. Hogland. And he would keep me after class, this was before Zac was born a long, long time ago, and talk to me about the the PMI. he was a really interesting guy and he would say, Rogers, you're standing after and talking to me today. Okay, all right. and I thought he was missing the logistics components. And so it's something I've been thinking about since I had Hoagland for a class in nineteen eighty-one, winter of eighty-one. So it's an old idea. And then next month it turns ten years old, the LMI. Yeah, it's really mostly Chris Caplice: That's what I was gonna say. Congratulations. It's ten years. That's that's pretty impressive. Dale Rogers: Zachary's work, but we also have three other faculty that that help us out with it. But it's it's it's Zac that does most of the the work and he's he's really made it much better than if it was something his father had just done. Chris Caplice: I would imagine that AI can help you tabulate some things pretty quickly. you can you probably have it pretty Zac Rogers: We Chris Caplice: automated at this point bringing stuff in. Zac Rogers: So we don't really use AI that much, actually. Chris Caplice: Mm. Zac Rogers: if if at all hardly. I mean we we have it's yeah, we set this up ten years ago, we just run it just a basic survey and then plug it into Excel, all the calculations happen. I've had people ask us about that actually, like 'cause we we write a fairly significant executive report at the beginning and people have asked me like, you're just doing this to AI and and we really don't actually. We we Chris Caplice: Yeah, yeah. Zac Rogers: are doing, you know, honest book reports, basically. about everything that's going on. But but I but I think it actually there's value to that because then we really under can understand the context. Because sometimes our numbers will push against something, say in the Wall Street Journal. And sometimes it'll be very confirmatory. And so it's interesting for us to see 'cause we're only seeing one small slice and so Kids, you gotta read. you know, doing the actual reading and the writing actually is very, very helpful. this is you know, this is an artisanal, clearly family report that's happening here. and we're I think we're doing it the old fashioned way. Dale Rogers: Well, and the Chris Caplice: That's okay. Dale Rogers: other thing is is that we really have to know this stuff because particularly in the early years I didn't know if we knew what we were talking about or n I mean, not that that's ever stopped me, I suppose, Chris, but but I you know, I thought, man, we gotta make sure this is right because People were telling us they were making strategic decisions in their companies based partly on what we said. Chris Caplice: Yeah, that's always that's always scary. Dale Rogers: So I Zac Rogers: Mm-hmm. Dale Rogers: I really I wanted to make sure we knew what we were doing. And I also wanted it, you know, I mean, you're a researcher like we are, you know, you learn you want to confirm your hypothesis or or not confirm it, you know. And so we include a lot of other stuff. to see does this fit and it's one of those things I'm nervous I'm an old man now, Chris, but I'm nervous every day that the work that I do in every part of my life is is authentic and true and yeah, I mean it's one of those things you just wanna be careful about. Chris Caplice: Yeah, yeah. So I'm curious, do you track individual responses or are they anonymous when they come to you? Zac Rogers: We can see. We make everything anonymous before we, obviously do much with it. but but you can track. I mean we have folks who, we can see it's their email and you know like, good, they they responded again and so you can track individually. You know, we we don't do too much in terms of breaking it apart by industry. You know, well we'll look upstream and downstream, like we'll look at retail versus Versus say manufacturers and wholesalers because a lot of times there's a big divergence there. Like right now, for instance, Chris Caplice: Sure. Zac Rogers: retailers are driving inventory down like crazy. And manufacturers are kind of they're very like, it's almost like the tortoise in the hare, right? Where retailers are just like you know, really fast moving around, whatever way the wind is blowing, and the manufacturers are just you know, well, it's a 59 again. Like we're just you know, turn the crank, and so we'll We'll break it up like that, but we don't break it apart really too regionally or I mean we have that underlying data. But that's not something that we usually analyze. And partly it's because, especially in the beginning, we didn't have as consistent a response base. We do now, I would say. We get a lot of people who are responding, you know, th like like Johnny Bauer socks, I he's responded every every month for the last eight years probably. but you know, before that it was kind of in and out, and so it was really hard to go sort of, you know, within Chris Caplice: Sure. No. Zac Rogers: subjects. Chris Caplice: Yeah, and so I was gonna ask the question, has survey response gotten worse or gotten Dale Rogers: And John's kind of family actually. Chris Caplice: gotten better over time? Because a lot of people have survey, you know, they're tired of it. They've had too much of it. but you say it sounds like your response rate is staying very pretty high and consistent. Dale Rogers: No, I don't think for us it's gotten worse. No. I work on the hey take the survey part of this deal. and there is a loyal group that doesn't change that much Chris Caplice: That's awesome. Dale Rogers: that really thinks it's an important thing. I mean it's a fast survey. we ask the eight components it's a blunt instrument, Chris. you know, sometimes people suggest why don't you add this? Why don't no we're I wanna keep it really tight. Chris Caplice: Nah, keep it simple. It it improves re response rate. Dale Rogers: Right. Right. Zac Rogers: No, we're like in and out. Like we do a cheeseburger, a double cheeseburger, fries, that's it. This is not a cheesecake factory Dale Rogers: That's it. Chris Caplice: Yeah, but doesn't doesn't In N Out have Zac Rogers: at the LMI. Chris Caplice: like the secret things you can order? Like the jungle burger and all that kind of stuff, the stuff that's not Dale Rogers: They do. Chris Caplice: on the menu. Zac Rogers: Yeah. Dale Rogers: Awful awful and stuff like that. Maybe that's not that secret, but yeah, you're you're right. but I you can't get people to answer Chris Caplice: Yeah, yeah. So we won't 'cause if you but so it's not nothing open ended. Not no open ended text. Dale Rogers: surveys if they're Chris Caplice: No no open ended text? Okay. Dale Rogers: Not so far. we just Zac Rogers: No, what's funny is we we were actually talking about that last month about adding a hey, is there Chris Caplice: Sentiment. Zac Rogers: something specifically you're seeing just for color? but again, we don't want to make it too too arduous for anybody. Dale Rogers: We do get emails from people that are enthusiastic and say, Chris Caplice: Fans! Dale Rogers: Hey, I just want you to know what I'm what I'm seeing. And Zac Rogers: That's true, yeah. We do get people who say, I just responded, by the way, this is what's going on with us. So maybe Dale Rogers: Yeah, yeah. Zac Rogers: maybe they want to tell us we should add it. Chris Caplice: Yeah. But Dale Rogers: Yeah. Chris Caplice: that's something that honestly AI's pretty good at mining sentiment for something like that is not a bad thing to do. If you have open ended, if you have open ended. But I'm curious if you looked at an individual, how they do over time, to to the strands. Do they are they are they consistently correct? Are they are there contrarians that are always contrarians? That'd be interesting to see for the individual side, Dale Rogers: we had some sort of record setting numbers on like transportation price increases. And Chris Caplice: Yeah, yeah, I saw that. Dale Rogers: that's always the canary in the coal mine. Transportation prices move faster than than everything else. There's greater amplitude. Chris Caplice: Yeah. Dale Rogers: but you know I I mean we we had 'cause what we were ninety something, Zac? I forgot what the number was, but Chris Caplice: Ninety six. Zac Rogers: ninety six transportation prices got two. Dale Rogers: Ninety-six and and both Chris Caplice: In May. Dale Rogers: I think both Zac and I thought Who is not who is not seeing transportation Zac Rogers: Yeah. Dale Rogers: prices increasing? I mean, ninety-six is really a high score, so it means pretty much everybody is, but there were some people that weren't Zac Rogers: Well and some some just said no movement I think too. Dale Rogers: but that geez, I mean I so so we do watch that. Chris Caplice: And that might be so that's compared to the previous month. Yeah. That makes sense. Zac Rogers: Right, yeah, exactly. And so it's so sometimes I don't think anyone said it was going down in May. Maybe we had like one or something. But but you know, the way you do it with the change index is Yeah, maybe one or two. Because the way you do a change index, right, is if they say it's going up it's a Dale Rogers: Didn't we have two? I thought we had two guys say it was going down. I think. Yeah. Yeah. Zac Rogers: one, staying the same is a point five, going down's a zero, and then you just kinda average all that together. So even Chris Caplice: Yeah, yeah. Zac Rogers: if you have a point five in there it'll you won't get to a hundred. Chris Caplice: Right, right. No, that makes that makes sense. so let's talk about some recent numbers. the the inventory levels. It seemed like they plummeted and I think you're explaining some of that, Zac, that it's different for the upstream versus the downstream. What do you think's happening there? Zac Rogers: Yes, absolutely. So we we saw some really interesting stuff with inventories really over the last couple of years. So so since the last time we've talked, I think we've evolved a little bit on the theory of inventory management. You know, I the last time we were here, I remember remember we were having that dumb debate about if JIT was good or not? Remember remember there was like that year where everyone thought, Well, maybe Chris Caplice: Yeah. Yeah. Zac Rogers: you should just have a lot of stuff and which was obviously not Chris Caplice: Yeah, just in case. Zac Rogers: incredibly, you know Yeah, not sustainable. And and so you know, one of the things that's really happened, COVID was kind of the big bang for for the change in in inventories. You know, we've we've mentioned we've been doing this 10 years. I can't imagine a more interesting ten years to have have been tracking this stuff. I mean, it's really been a Chris Caplice: Yeah, true. Zac Rogers: just a decade of disruptions, essentially. And and so you know, the one of the things that happened in like 2021 was okay, let's pull everything forward. Forward and you saw, and you can even look at government data, inventory to sales ratios for retailers used to be higher than wholesalers. Now they're about the same. And sometimes for retailers, even lower. And so our downstream respondents, and not just in our survey, but everywhere, have really gotten into the idea of sort of pushing back. Inventory onto wholesalers in a way where it's sort of like JIT for me, but not for you. especially with tariffs and everything. We, you know, last year we saw a huge pull forward of inventory early. and then kind of nothing moved. It's why it was sort of like: is the trucking market dead? What's going on? Like July Chris Caplice: Yeah, yeah. Zac Rogers: and August were terrible. Well, it's because we pulled everything forward early, it sat at the wholesale level, and then in the middle of October. We saw just a rush of stuff coming down to the retailers. It sold really well. We saw inventories went down to like 35 in December. I mean, retailers really were masterful in the way they managed inventory last year. Well, now coming into this year, we had a different situation because last year it was let's pull ahead before the tariffs happen. Well, this year the tariffs had already happened. Like they were here. And we had our little reprieve in February and maybe now they're back. I don't know. I haven't checked the news in the last eight minutes that we've been talking, so I I I'm maybe I'm Chris Caplice: You never know. Zac Rogers: not up to date on tariffs. Dale Rogers: Yeah. Zac Rogers: but so, you know, what happened earlier this year was retailers were staying very sort of Cautious. They were being very conservative with when they were going to bring in inventories. Partly we see this pick up more too in February, when you know we invade Iran. And now we have a real challenge where you know, on one side, really high fuel prices would say, let's do some bulk ordering, let's maybe group things together and save on transportation costs because transportation has got so expensive. And You know, in the US we we lose twenty percent of the oil, well what happens? Gas prices go up. In other parts of the world it's like brownouts and closing factories and and so there's a worry, I think, on the manufacturing side that we could have component shortages. And so on the manufacturing side what we've seen this year is let's pull inventory ahead a little bit. And and it's been very, like I said, slow and steady. Like manufacturing inventory numbers this year, I think have ranged from like a fifty two to a fifty nine. Like they've just been kind of a steady band. Downstream has been, you know, it was a 46 this month. It was a 66 last month. Downstream has been more all over the place. They were very slow in the beginning of the year, I think because people were worried about inflation and is the consumer can gonna continue to show up. The consumer is still showing up. and then in May and June when it became clear that we were maybe switching to the Section 338 tariffs, and you know, we might suddenly put a strategic fifty percent tariff on hockey sticks from Canada or whatever. We were like, we better pull stuff forward. And so we saw a really big and this is what I'm talking about how retailers are like the hair. We saw a huge spike in inventories pulled forward in May and June. We got up to 66 in June. And then down to 46 in July. so now inventories are contracting again. And and what we're seeing, I think, is a repeat of that same trick from last year, which is pull a lot of inventory forward as fast as we can to avoid tariffs. And then wholesalers, you hold on to that. And we'll let you know when we when we need it. and Chris Caplice: Right. Yeah. Yeah. Dale Rogers: And it it it's really been brilliant for the downstream guys that Chris Caplice: Mm. Dale Rogers: that I mean, we already saw it happening before COVID a little bit, but certainly with COVID, it taught, Hey, let's get it in the US, let's get it here, but it's gonna be just in time still for me, but not for thee. So Chris Caplice: But hasn't hasn't it always been that way for just in time? To be honest, like for Toyota and everything, the the inventory or Dell, it pushes to the suppliers. Hasn't it always been that balloon that you squeeze here, the air's gotta go somewhere? Dale Rogers: I d I don't think I don't think we cared so much about the location. I think that as long as you get it to me in time. Now, you know, you go back forty years in the early days of just in time, when I was trying to make it happen at a semiconductor company, with limited success. you know, you you you wanted to have Avnet and Arrow next door to do the distribution of s of components. we had a a lady work for Arrow down the hallway that we could get we could order from to make sure. So we needed close, but over time we kinda let that be a global thing and let the logistics folks and whoever kind of Manage that and and just make sure we have it when we need it and that that sort of synchronous merge and transit, that that kind of thing. And we're seeing that that less now and and more let y so you legally hold it, but it's kind of our inventory, y you know, and and it has been for a while. I mean, if you look at Apple's cash conversion cycle, You know, it's it's around ten, maybe it's eleven right now, but eleven days worth of inventory. And you know that globally they got more than eleven days of inventory, but they're just somebody else is holding it, probably Foxcon and Chris Caplice: Yeah, no, that makes that makes sense. And and yeah, I I remember the days when you see in the especially in the mainstream press where J I T is dead. They're thinking that everyone Zac Rogers: Mm-hmm. Chris Caplice: switches from one inventory model to another. but it's everything's a little more nuanced than that. And No, I never Dale Rogers: By the way, you never heard us say that. I it's one of those things. When everybody was talking about it, I thought, I don't think this is right, but what if it is? Jeez. But Chris Caplice: Yeah. Yeah. Zac Rogers: No, remember we saw, so one of the things we saw was in December of 2021, inventories went up. And that was right at the height of JIT's a bad idea. And I remember thinking like, well, that doesn't seem good. Inventory's not supposed to go up in December. and then we had this huge sort of, I mean, it's it's the beer game, right? We had this huge sort of hangover from COVID where we had way too much inventory in the system. And partly that that scarred the retailers a little bit. Because if you look at who's taking the really big write downs in 22, it was retailers. The other thing I think that really is a a legacy of that time is it's a mix of JIT and JIC. And what I mean by that is there were so many remember the the pictures of all the all the Ford trucks on the motor speedway that didn't have didn't have semiconductors in them? Which by the way, I they had to redo a lot of those trucks because you know there's little like you know weasels and rats in the field. They're like, that looks like a great place to start a family. And and so It was it was a mess and so What's interesting, I think that's one of the reasons we see this difference between manufacturing and retail right now is retailers, you f you always are fighting the last war, right? And so retailers are like, We had way too much inventory, that's not happening again. Manufacturers are thinking, we ran out of critical components and it killed us. We can't Chris Caplice: Yeah, yeah. Zac Rogers: run out of critical components. And that's why I think you see this real divergence in in sort of inventory management strategies from our upstream versus our downstream respondents, because it's a reaction to the way they got burned. in 2021, 2022 and 2023. Yeah. Chris Caplice: And it it makes total sense if I'm Dale Rogers: But you're right. Do you remember that old thing, Chris? Do you remember that old thing, Hewlett Packard? I mean, you're a little bit younger than me, but but that remember that push pull boundary deal? Corey Billington, those guys at HP back 30 years ago. And and and so to some extent, it it is a very old idea. Where do we where do we set the push-pull boundary? So we push inventory to the the brand you know, to the to the the component manufacturers or to the three PL or whatever and then and and then we we just push it closer to us and then we Chris Caplice: Sure. Dale Rogers: pull it from there. Chris Caplice: Yeah, it's postponed. But the point I was gonna make though, it makes a t ton of sense for you know, if you have excess inventory as a retailer, you can always discount and sell. If you're a manufacturer and your Ford F one fifty Zac Rogers: Mm-hmm. Chris Caplice: is are missing a semiconductor or some of the the front Ford labels, or didn't they have a shortage of some of those? You can't sell the truck. So you're stuck. So you're it's much more critical for up there. Zac Rogers: Right. Mm-hmm. Dale Rogers: Right. Chris Caplice: Yeah, so excess inventory has a different cost where you are in the supply chain. That makes a ton of sense. let's Dale Rogers: Right. Chris Caplice: talk about transportation though, because that's that's the big news. Have you ever seen a ninety six before? That seems insane. Zac Rogers: Right. Chris Caplice: Did that happen in the pandemic as well? Zac Rogers: No. We had never been quite that high as we were as we were in May. I think the the previous high was we had we had some nineties I know during the pandemic, Chris Caplice: Yeah. Zac Rogers: like ninety-threes, but no, we had a a ninety-five in April and a ninety-six in May, which are truly, truly high levels. And Chris Caplice: So it's pretty much almost unanimous. Zac Rogers: then and then what's interesting sorry, go ahead. Chris Caplice: No, it's all it's pretty much unanimous that people are saying. I mean, all but onesie twosies Dale Rogers: Yeah. Chris Caplice: are saying to get that high Zac Rogers: Yes. Chris Caplice: a level Zac Rogers: Yeah. Dale Rogers: Yeah. Yeah, and Chris Caplice: So Zac Rogers: What in Dale Rogers: and it's all sort of self inflicted too. That's the weird thing. You know, the other times we've seen increases not quite to that extent, you know, it was some sort of phenomenon. It was it was it was covet or but in this case it was choices made by leaders in the country. I mean it was a war, it was a tariffs, it was you know, it it it we we hadn't seen so clearly a link between policy and price increases. I th I don't remember when we would have ever seen that. Chris Caplice: You really think that's policy related? I thought it's Zac Rogers: Yeah. Chris Caplice: more capacity driven, that the capacity's been driven out, Zac Rogers: So Chris Caplice: the drivers and all those type of policies as opposed to the the war and everything. Okay. Zac Rogers: That's a huge piece of it. So it's it's kind of two things were happening at once, right? So in 2022, transportation fell off a cliff, basically. We had way too much inventory in the system because we thought maybe JIT was wrong. And then also Russia invades Ukraine, all of this, you know, and and when that happened, the price of gas and food went way, way up. And you know, those are the two things you can't not buy. And so we we ended up having kind of a even though gas. Prices were up, transportation crashed because we weren't moving many goods around and we had burned through a lot of the stimulus checks and and we had this inflation that was really hot. And so we then saw basically a a an a two-year freight recession. Really from you know March of 22 is when it starts. We probably don't start the actual recession part of it till June. And then that goes all the way into the middle of 2024, basically. And it peaked in July of 23. That was the absolute sort of you know bottom that we hit. And one of the things that's interesting, we actually saw a change in mid-July, and that in hey, suddenly capacity is starting to to tighten up a little bit and and prices are are you know not going down as fast. It was when YRC went away. and and that was I think the beginning of a real culling of or or it epitomized. Maybe it wasn't beginning, a culling of of capacity. A lot of capacity started getting pulled off the market. And then you have other things, right? Like like you know, you have the crackdown on the drivers, that that's been really tough over the last the last 18 months. And so labor is hurt, especially for long haul. It's really difficult to get long haul. And then the other thing that happened, and this gets again back to like you're always you're you're running away from the thing that burned you before. We have not seen a big increase in capacity. Yeah, we've had prices up here in the 90s for like five months, and capacity just keeps going down. The July reading of 28.4 is tied as the second lowest rate of capacity that we've had in in the 10 years. And actually the second lowest reading we've had for any metric because nothing gets that low. and so one of the things that I think is interesting is There has not been a big rush like there was like the last time we saw prices go up like this was the end of twenty twenty. And we saw a big rush, let's let's build fleets. We have not Chris Caplice: Right. Zac Rogers: seen a big rush to build fleets in twenty twenty six. I mean it's more than twenty five or twenty-four when like, you know, it was zero, but but it has not been a big rush. And I think the the carriers, I think there's two things going on. One is let's not get burned like we did last time. Let's not overbuild, over order, because who knows by the time the fleets actually get here Will this have fallen off anyway? Chris Caplice: Right, right. Zac Rogers: And then the other thing I think is we're in this really interesting, you know, one of the things that has fascinated me this year is in the labor market, this no-hire, no-fire economy, where it's like, well, we're not hiring a lot of folks, but that's sort of okay, I guess, because not a lot of people are getting fired. and I think it's similar in transportation where costs are really, really high. But demand is still there. So if demand is strong and cost is strong, okay, that's all right, we'll just keep absorbing these costs. But we're not gonna get ahead of our skis because if the demand drops at all, now we're stuck with the check of these really big costs. And so we have not seen capacity come on board in any meaningful way. You know, in in April of this year, one of the things I always look at is the spread between transportation price and transportation. Transportation capacity. And April this year is the biggest it's ever been. prices were at 95, capacity is at 28.4. It was a, and this is gonna be a somewhat ominous number, a 66.6 point spread, which is the farthest one we've ever had. And then the months after that, 64, 61, and then this month it's 58.5. It's not, you know, normally that's like a 20-point difference. And so We have this really elevated level of prices and you would expect the capacities coming on would be coming on board, but the reading I get as we get notes from people and we see the numbers is that no one wants to take a big step. to to start building more capacity because of the uncertainty right now. Because you don't know what are what's the tariff program gonna be when this stuff gets over here, what's labor looking like. You know, the Strait of Hormuz opens and shuts every day, basically. Chris Caplice: Right? Zac Rogers: and so it's there's so much with so many, you know, X's, so many variables, no one feels good, it seems like, about making any sort of capital investment that's not a data center. Dale Rogers: And Chris, it's weird because transportation, if if you're trying to figure out where in the supply chain it's easy to add capacity. For my whole life, transportation was where it was easy. Because you can park trucks and then you can bring back online. y you know, it's interesting out a little bit I think it's west of Tucson. I'm up in the Phoenix area, Tempe, but but west of of Tucson, there's this huge line of locomotives just parked on this really interesting rail siding right near the interstate. eight there and or ten it's one of those two and and and that sub is just parked waiting for a time when you you you need that capacity so transportation capacity during my whole career has been very easy to go up and down quickly and as Zac said there's kind of a paralysis there is some driver issues and so on but But people don't know how to inv invest. So the the truthfully the worst kind of tariffs are the ones that would introduce uncertainty. tariffs you can get through But if you don't know what the answer is. So we're we're i i it the the economy seems like it's in relatively good shape with some weakening signs, but but the the uncertainty is the biggest issue. Chris Caplice: Sure. Yeah, that's I know for tariffs, the biggest thing was just the variability of the tariffs. It just took. And and what's funny is if you look at December twenty twenty four and compare that to December twenty twenty five, they were identical in terms of the metrics that we track for truckload markets. What happened in January though, the tariffs hit in twenty twenty-five. And so we expected twenty-five to be what twenty-six is now, and it would have been, except the tariffs, exactly what you said, Zac, inventory got pulled forward and then everything just sat. until people figured out that the tariffs don't really mean anything. They're kinda negotiating tactics. And so twenty six I thought was gonna happen a year earlier, but it finally did happen now. But I'm I'm curious about the the capacity because there's no incentive really for a trucking company to add drivers or tractors right now because they're they're finally recouping higher rates than they have been for a while. They're still not as high as the levels on average that you saw during the pandemic, but it's creeping up there after three years of pretty much stagnant growth. rates stopped declining on the contract side three years ago, but it took a while for them to start going back up again. I I'm personally Zac Rogers: Exactly. Chris Caplice: surprised that anyone's surprised. that the trucking market contracted again. I mean, this is what it does. It capacity Zac Rogers: Mm-hmm. Chris Caplice: leaves, even if demand stays steady, it's it's gonna go up. And you're right, Dale, Zac Rogers: Well and but Chris Caplice: more the tail that long tail of owner operators, they're gonna start coming back in again. so we'll we'll see. That Dale Rogers: Well, because there's never been barriers to entry or exit in the trucking business. I mean, Chris Caplice: Or exit. Yep. Yep. Dale Rogers: it's a easy business to get into. I mean I I I mean I don't wanna do it, but but it's a and it's a easy business to get out of. Yeah. Yeah, I when I f when I fly Chris Caplice: Easy business to get out of, sadly. Yeah, yeah. Yeah, yeah. No, Porter's forces, man. Dale Rogers: to different places these days, I'll ask the Uber driver who's taking me wherever I'm supposed to go, Hey, what have you b how long you been driving Uber driving Uber? And I think four times in the last two years the driver said, Well, I ha I had a truck and I I parked it. And so now I'm Chris Caplice: Yeah. Yeah, I get the same. Dale Rogers: driving Uber. Yeah. Chris Caplice: And so that it it will start coming back in. I think it's just a a recouping. because it was it was in that recession for so long. Zac Rogers: I think so too. You shippers and carriers have like a Hatfield McCoys, you know like where it's like, Well, they were getting us for three years. Now we're gonna get them for a little bit, I think. but Chris Caplice: Yeah, it it's funny. Zac Rogers: but I mean you would see, you know, your supply and demand graphs, if if demand goes up, eventually supply needs to move too, but but like you said, the incentives aren't really there and I think the uncertainty is is one of the reasons there is no incentive because no one wants to make an investment that might turn might blow up in their face again, 'cause that's exactly what happened in Twenty, twenty one, twenty two. Chris Caplice: Yeah, a lot of a lot of not smart capital came in for a lot of tracking companies trying to get that pandemic peak in you know the end of twenty twenty two, early twenty twenty two. And that that capacity exited years ago. But yeah, we'll see how that how that how that goes. so one of the things you you talked about is the warehousing. That that's suddenly increasing again after the last couple of years it had kind of been contracting. Do you see that as a continuing Zac Rogers: Yes. Chris Caplice: trend? Zac Rogers: Well it's it's an interesting one to me. Like We've suddenly seen, yeah, I I sort of mapped out this, okay, what was the average warehousing capacity, you know, for the last two years and and up until I kind of did pre run, post eron, right? And it was it was about a fifty-three for capacity, you know, in the the last two years. And in the last five months, it's been a forty seven. So it's it's now contracting. And same thing prices were at sixty seven, now they're seventy three. Those aren't huge differences, but but they are real shifts. And so I I think there's two things going on. One is on the manufacturing side, we are seeing this pull forward of like critical components and wholesalers holding on to stuff because of the terrace. The other thing that that's interesting is if if you look at where some of these warehouses are getting placed, they're relatively close to where data centers are going up. because, you know, we're we're pulling over all of these materials and components and and tech. to build up these data centers, but the data centers take a long time to build. And so we're actually seeing almost like it's almost like boom towns, you know, coming up by the railroad or the or the mines or something where, all right, well the gold is in these hills now, so put the warehouses around the the data centers. And so I think that burst of it is is probably Not short term, but it's it's very tied to that s particular stimulus. I think warehousing is similar to to trucking where we did overbuild capacity absolutely. Like you want to talk about dumb money. Like we were putting distribution centers everywhere in like 2021 and and we way overbuilt. I mean, there's an Amazon down the street from my house that b the box has been up for three years and not one truck has gone in or out of that thing. They're just waiting. And and and so I think right now a lot of the warehouse comeback is tied to data centers. But there is also part of it that is we're bulking up our our inventories again, similar to what we did last year, because supply chains, you know, you're talking about uncertainty. Essentially you have the uncertainty of tariffs, what's everything gonna cost? And then you add uncertainty with our consumers gonna keep showing up, even though prices have gone up. And essentially what we have seen, I think, is that People are betting on the consumers showing up. Like we'd rather deal with that uncertainty than the uncertainty of cost. So let's just bring it in, and maybe the consumers show up, maybe they don't. But we feel better about them showing up than we do about knowing what tariffs are gonna be in in six months. So pull it forward, and that's one of the reasons I think that we've seen warehousing go up. You know, we saw in in June warehousing utilization was all the way up to sixty-nine point four, which is the highest it's been in like four years and and just you know as as a you know sort of counterpoint in December it was 42.9 so it it went up you know 26 points in five months and and really what I think that represents is where you know the sort of marginal rate of of pulling things into warehouses is going up. Like it's an increasing marginal weight rate of of warehousing warehousing utilization and And and it's interesting because you where you really see the tightness, you know, one of the other ways we split apart our respondents is large versus small firms. And our smaller firms are are more of them tend to be at the wholesale level, not all of them but but a lot of them are. And they reported warehousing capacity at at forty two point nine this month. Chris Caplice: Hmm. Zac Rogers: It was forty nine for the big guys. And so it's it's the capacity's really tight, I think, right now for the small guys because they're getting boxed out a little bit, of of maybe the new bills or expensive stuff. And and it's interesting because both of those groups came in at exactly fifty-five for inventory. So it's not like we're just jamming all the inventories on the small firms. They're both going at the same the same rate. But smaller firms have a more pronounced shortage of physical logistics assets. than the large firms kinda do and and we saw that last year both with warehousing and transportation is a lot of times the canary and the coal mine for is there a squeeze going on is is those those smaller respondents. Dale Rogers: I think there's something else too, Chris. This is a Chris Caplice: It's Hm. What's that? Dale Rogers: this is a theory, maybe more than than than based on the numbers from the LMI. But there there's a couple external factors I think driving this. Commercial real estate firms have a few things that they can sell. They can sell office buildings, they can sell shopping centers, they can sell warehouses, they can sell data centers. Well, right now, the the hot product that's having some trouble because there's a reaction to it are data centers. Office building and shopping centers are not what they used to be. And warehousing of all the all their products is kind of the safest one. So they got to do something. And so I think we're seeing that. The other external factor that's interesting to me. So did you ever teach your students the square root law where it says the inventory? So it's one of those things everybody in my class has to hear about you know, you got one facility, one warehouse, you go to four. you got $1 million in one facility. you go to four facilities. Get the same customer service coverage. You got to go to two million because square root of four now is two, anyway. So square root. Zac Rogers: This was explained to me with like boxes for Legos when I was like 10. This was like, okay, so you see how we got the second box. Now here's what this is. Yeah. Dale Rogers: That's true. He's b maybe younger than ten, Zacho. Yeah. Chris Caplice: I always whenever I introduce it, I make sure you understand the underlying assumptions under there that the inventory is being managed in the same way, E.O. Q, all those things, Dale Rogers: Right. Chris Caplice: and it's an even distribution and all that kind of stuff. Yeah. Yeah, it's a great, great, great Dale Rogers: Right, right. Chris Caplice: back of the envelope concept. Dale Rogers: Exactly. And and so so d during most of our careers, Chris, we saw people go from a large number of warehouses down to a small number. And I worked on some some facility location projects where you say, okay, you had twenty. Now you need four million, million and a half square foot facilities. We'll put one in Sparks, Nevada. I was living there at the time. And and one in eastern Pennsylvania, McDonough, Georgia, or somewhere near Atlanta, and then Indianapolis or Columbus. And and that will be our warehouse network. Well, what we've seen, it was really Amazon that was the pioneer and and screwing up my square root law that I would always teach is moving warehouses closer s closer to the consumer but also today you don't want cookie cutter distribution centers, even though that's easier to manage, you want a portfolio of facilities. So you want different types of facilities and and that movement, there there's always been that a little bit. You know, Walmart had special jewelry distribution centers or whatever. But but but we were moving towards sort of standardization and fewer locations and now we're busting that that open. And and I think that's another long term sort of trend. That's an external factor. but I don't have numbers to prove that. That's just an old professor thinks that, truthfully. And and you are seeing it definitely anecdotally. Chris Caplice: Yeah, certainly for you know, the retailers are starting to push more. For fast faster response time. A hundred percent. It's going there. Micro fulfillment Dale Rogers: Right. Chris Caplice: centers and all of that. Yeah. Yep. Yep. Dale Rogers: Pop up distribution centers. Yeah, you know, I've been an advisor to Flex, those guys, F L E X E, the the sort of Airbnb for warehousing, and it's really interesting because there's that wasn't a concept we really had, and now for more than 10 years now, they've been a player in like temporary warehousing where you pop up a facility quick and then you know. So I I think that's part of it. Right. Chris Caplice: Yeah, companies use it for promotions and different things. Yeah, it's a it's a clever thing. But let me go back to data centers. Go back to that. Because I I was presenting somewhere talking to a bunch of carriers, and I was at shocked at the number of carriers drive in, not not flatbed, not not rail, who are servicing data centers. It's propping up, it seems half the industry right now. And if the data centers truly do stop and demand is it isn't replaced with demand somewhere else, that could have a significant impact on Dale Rogers: You know, it's interesting, Chris. So so look at GDP growth for second quarter. So April, May, June, 2026, it was one and a half percent GDP growth, which isn't terrible. But if you break that down what it was, it was 1.24 of that one and a half. was AI and data center related. And the whole rest of the economic growth was like a quarter of a percent. Everything else put together. And so if that data center stuff falters, and it seems like at some point we're gonna get to a saturation point or I I mean it there you know, I don't completely understand the political movement against them but but I know there is that. and that could be a huge hit to the economy because most all of our growth was AI and data centers in the last quarter. Chris Caplice: So yeah, a couple of things there. we will overbuild. I mean the the incentives to be the first or be one of the remainders is just too strong. It reminds me of two thousand, two thousand one with the global crossing. Zac Rogers: it's I mean, you just gotta build a big enough network to get a good IPO. Everybody wants to be the first one on that, I think. Dale Rogers: Global crossing. Right. Chris Caplice: Yeah. Yeah, it's it's and so we overbuilt all the optic, all the fiber. But the thing Dale Rogers: Right. Chris Caplice: is demand will always catch up with over capacity. It just takes time. So someone will Dale Rogers: Yeah. Chris Caplice: lose a lot of money, but the data centers are not gonna they're gonna be used. And so we'll see we'll see how that pops out. But th yeah, there will be a reckoning. It it's go it's growing way too fast. And especially with old codgers like you not using AI, swearing it off apparently. Dale Rogers: Yeah. Zac Rogers: Right, yeah. Chris Caplice: So last question, and then I'll let you guys go. What are your predictions for the economy for the rest of the year? H two twenty twenty six, the second half and early into twenty seventeen, twenty twenty seven rather. Zac Rogers: So we always ask our our respondents, where do you see this going over the next the next twelve months? And and the overall number that we returned, and now this is twelve months, not six, was was a seventy point five, which is a a pretty robust rate of of expansion. You know, we we did see an interesting movement with our upstream versus downstream inventory wise especially upstream again is is thinking we're gonna be steady right they they came in at at fifty for inventory levels basically we're gonna just keep t turning the crank downstream came in at 68 which which does suggest that they know they are going to need to to build inventories back up again Chris Caplice: Yeah, yeah. Zac Rogers: and I think that actually is is some hope maybe on their side that you know costs will stabilize a little bit. Cause because the really interesting thing to me about the future stuff is, you know, I I talked about how I always look at the split between transportation price capacity. I also always look at inventory levels and costs. because generally, and I went back and through the history of the 10 years, usually costs come in about 13 points higher than levels. because inventories just get more expensive. And and and we've been, you know, we've had enough five years of inflation baked. of this data. Well, downstream, all right, inventory levels look like a 68, inventory costs are 73. So only a five-point difference. You would expect as you bring in more inventories that you would see, you know, some cost increases. Upstream, remember it's a 50, their predicted costs are 84.7. So that's a 35-point gap, basically, on the manufacturing level. And I think that speaks to real concern about the relative cost of inventories and that it will keep getting more expensive, particularly on the upstream, upstream side. The the other things we look at are capacities. capacity actually, it's interesting. For warehouses, both of them came in the mid fifties, basically. and so they're they're both expecting sort of I think some you know, modest growth with warehousing. Price is still high, and again, upstream said 86 for price, which to 71 downstream, which is you know, it's gonna be really expensive. and then capacity for transportation was I think the most interesting difference. Downstream said 55. Like there, I think downstream folks are expecting there to be some stabilization in the market. Like we will hit some sort of equilibrium. Upstream said 34. which is they're still, I think, really expecting a supply-demand mismatch. And that might come down to different modalities, maybe. I'm I'm not totally sure what it is there, you know, why why that's 20 points lower, because both the prices are about the same. 88 downstream, 92, 92 upstream. So prices are about the same, and utilization is like exactly the same. It's really that it seems like to me, manufacturing, and this could speak to some of the rush with the data centers, like how much is serving you know, data center construction. Manufacturers seem to be more worried about finding capacity. And and one of my theories is that it comes down to Sh you know, short haul is more likely to stabilize quickly in terms of capacity coming online than long haul. And our manufacturers and upstream folks are probably you know more reliant on the long haul than the short haul, and that's one of the reasons for that that 20-point gap. So summing that all together, what does that mean? Essentially, it it seems like costs will remain elevated, I would say certainly through the rest of the year. I would anticipate that we'll see a similar movement to what we saw in. 25 where a lot of inventory really rushes down in October. And I think that we'll continue to see tightness in in transportation. And if there is any loosening in the market, it's going to be like you're thinking I'm a you know owner operator, whatever, I think there's going to be more movement in the sort of short haul stuff to get capacity back online because that's easier. It's it's more seasonal maybe, and the long haul will continue to struggle and and I think transportation markets, at least according to our respondents, and they're usually pretty accurate, transportation looks like it's gonna be pretty tight through the rest of the year. Chris Caplice: Dale, what do you think? Dale Rogers: Well, I agree with Zac. I think no I I well I agree Chris Caplice: That's no fun. I thought you'd have a little we'd have a little disagreement. Dale Rogers: I I think I think Zachary's right. I I I do think though that particularly depending on how the midterm elections go, things could not change at all or they could change dramatically. And that's going to introduce more uncertainty into my guess is is that a Democratic Congress will increase the amount of uncertainty in the US economy. And and and I think we're in a sort of a a a little not so fun game. with the Iran war. I don't think that's gonna get over anytime soon. and you're really seeing a little bit of the splintering of the global economy and that's more uncertainty. So I'm nervous based on what we're seeing, it's early signs but more uncertainty. With more policy uncertainty, and probably not just in the US, probably globally. The weird thing is, if you know, you go back to when I was young and we started doing stuff in China, started manufacturing, I thought, well, you know, over time we're gonna see China. move in our direction around intellectual property and and everything and style of government and everything and and what's actually happened is the opposite. But one of the things that's interesting is that, you know, China seems to the outside world a lot more stable and consistent. they're rascals sometimes, I know, but they seem more solid And it feels to me like we're in the middle of a shift with greater uncertainty than ever. And it seems like changing what could happen at the end of the year with an election is likely to increase that and not reduce it. I Chris Caplice: could because it would introduce a change. I I agree. Whether which one would cause more issues to the economy longer, but it would be a change, so uncertainty go up. I don't quite agree with you as far as China looking so solid. Its Zac Rogers: It would be. Well especially with the tariffs, right? 'Cause I'm sorry, go ahead. Chris Caplice: housing market is pretty pretty shaky right now. They've overbuilt a lot of stuff there. So it's a it's a yeah, yeah. A lot of areas. Dale Rogers: That's true. They they have they have overcapacity in a lot of areas, truthfully. But What you just said, Chris, is absolutely right. I think demand eventually catches up. And when you got a billion and something people, I I think eventually demand will catch up. Chris Caplice: Yeah, that one child policy is catching up to him. Dale Rogers: That's true. That is absolutely true. Zac Rogers: Well, you know, I I would say too that the the if there is mixed government, right, there's I and I think you hit the nail on the head, Chris. Sh it's gonna be short term uncertainty. It could help long term, I think. especially if you can throw sand in the gears of just new tariffs coming out all the time. I think that 'cause basically one of the reasons we've had this uncertain tariff policy is Congress seems uninterested in anything. And so I I do think if you had mixed government you would expect you know, digging deeper into the tariffs. Can you just do it by executive order? Can you not? Now short term you might see a big rush of executive orders because now nothing moves legislatively. But I would anticipate that if you could slow it down, that might introduce certainty eventually. but that certainly won't happen right away, I don't think. Chris Caplice: Yeah. Well we'll see. It's only a couple of months away and the primaries are fun to watch to see what's happening. Zac Rogers: yeah. Yeah. Chris Caplice: All right, Dale, Zac, thank you so much for joining me. Zac Rogers: Thanks for having us. This is great. Dale Rogers: Really fun to be with you. Chris Caplice: Always fun. Okay, everyone, stay tuned for the truckload market update. Hello, this is the truckload market update for twenty August 2026. In the dry van market, we found that contract rates, active contract rates, stayed flat, which is pretty rare seeing them actually stay pretty flat over a two-week period, but they did. spot rates dropped point eight percent, and the current level of replacement rates for dry van is positive eight point four percent. New contract rates coming in are on average eight point four percent higher than the rates they're replacing. The market gap between spot and contract is 14 cents a mile, where spot is above contract. Year-over-year change in spot rates is 40.6%, and year-over-year change in contract rates for dry band is about 13%. In temp control, we saw that contract rates dropped 1%. spot rates increased slightly 0.5%. And the current level of replacement rates for temp control is 9.5%. The gap between spot and contract is 13 cents a mile. And the year over year change for spot rates was 29.4%, and contract was 9.6%. Again, that was for temp control. All right, intermodal. Different from all the other markets, we found that contract rates increased slightly, 0.9%. Spot rates also increased 5.5%. But again, like I say every time, intermodal spot is pretty tiny. current level replacement rates is negative nine point three percent. So we're seeing a decrease in contract rates coming in and new bids, which is kind of surprising. I find that surprising. The gap between spot and contract is 4 cents a mile. Year-over-year change in spot rates is positive 12%. And year-over-year change in contract rates for intermodal is 6.4%. Finally, flatbed. We saw contract rates drop 2.1%, spot rates increase 1%. Current level of replacement rates for flatbed is positive 6.1%. The gap is 26 cents a mile, spot above contract. And the year-over-year change in spot rates is 31.9%. And your view changing contract rates for flatbed is 10%. So what are we looking at? Well, it's looking like drive-in, temp control, and flatbed contract rates kind of peaked out. It's it's August, right? So we're finding that post-fourth of July, it's a slowdown. We always expect this. So it's kind of tapering off for both contract rates and for mostly for spot rates. again, intermodal is a d a different beast, so that's a different thing. But their level of replacement rates are still pretty high. They're high single digits for drive-in, temp control, and flatbed. So we're seeing contract rates coming in. We're seeing, you know, big surge through the beginning part of the year, up through the halfway mark, little pause here. We'll see what happens in September when things get tight into Q3, later in Q3 and Q4. we're seeing the the gap between spot and contract is still big. you know, 26 cents for flatbed, that's that's a pretty big market. 14 cents, 13 cents for temp control and and van. So that's that's pretty big. And then overall the year-over-year changes, I mean spot rates through the roof. 30% for flatbed and temp control, 40% for dry van. Contract on the other side has been much smaller, high low double digits, 10%, 9%, somewhere around there. So we're seeing an increase in those rates where contract's slower than spot, like it typically is. And we'll see what happens at the rest of Q three and into Q4. To see what happens. Cause as we all know, the construction of data centers is really the engine right here. It's driving not just flatbed, it's driving all the different modes. So the question is, is that gonna slow down? Is is that gonna change things? Because that's really the bright spot for demand. if that craters or slows down, that could have a huge ripple effect. And we'll keep our eye on that as we go. But that's the state of the markets in twenty August, twenty twenty six.