The latest supply chain report from the Logistics Managers’ Index (LMI) indicates a notable shift in transportation prices, marking the first uptick in 19 months, driven by retailers bolstering their inventories. The LMI for January climbed by 5 percentage points to reach 55.6, reflecting growth in five of the last six months. The surge in restocking, particularly in the retail sector post the bustling holiday season, underscores a growing confidence in the economy among Americans.
A significant highlight of the report was the reversal in transportation prices, which surged by 12.7 points, pushing firmly into expansion territory. Although transportation capacity continued to expand at a slower pace compared to December, transportation utilization saw a slight uptick. The report suggests that sustained growth is needed to officially declare an end to the freight recession. Nevertheless, the overall findings indicate a potential shift towards growth in the logistics industry after a prolonged downturn that commenced in 2022.
Despite a weaker utilization of transportation towards the latter half of January, the report remains optimistic, citing the acceleration in transportation prices as a signal of a changing cycle. Notably, transportation prices outpaced capacity growth, hinting at a market shift. The month witnessed a growth in prices even as diesel prices experienced a year-on-year decline of over 15%.
Looking ahead, respondents foresee slight growth in capacity, alongside more substantial increases in utilization and prices over the next year. Inventory levels showed expansion for the first time in three months, with downstream companies like retailers restocking at a brisk pace compared to upstream counterparts. Upstream providers anticipate an increase in inventory levels a year from now, while downstream companies remain neutral.
Inventory costs surged by 11 points from December, primarily due to the rise in merchandise levels, though the comparison was less stark given the lowest-ever monthly reading in December. Warehousing metrics, albeit slightly down, remained close to December readings, with modest expansion in capacity, a tapering of utilization from pandemic highs, and continued growth in prices, albeit at a slower pace.
Overall, respondents foresee the LMI standing at 62.8 a year from now, reflecting an upward trend compared to the previous month and surpassing the index's average.
The LMI, a collaborative effort among several universities and industry professionals, paints a cautiously optimistic picture of the logistics landscape. Researchers include Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University and the University of Nevada, Reno, conducted in conjunction with the Council of Supply Chain Management Professionals.
Source: www.freightwaves.com
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