U.S. Logistics Manager’s Index Record Low as Supply Chain Strives to Rebalance

With the sputtering restart of the global economy, we look towards The Logistics Manager’s Index as insight in the US for a visualization of it’s rebalancing affect and the strengths and weaknesses in that process. The LMI fell for a third consecutive month in April to hit another record low of 50.9 down from 51.1 in March. The decline was mainly driven by a dip in inventory levels (-4.7 to 50.9), suggesting firms continue to get closer to properly balancing their supply of goods.

Logistics Manager’s Index 

Notably the drop in inventories has led to a significant fall in warehousing utilization (-9.9 to 55.1) which in turn has dropped warehousing prices (-1.1 to 69.8) particularly for downstream firms.

Like 2019, it seems that there’s a recession in the freight industry, but not in the overall economy.

Transportation utilization moved back into expansion (+5 to 55) and transportation prices fell less (+5.7 to 36.8), possible due to the fact that inventories continue to dip in consumer goods and retail industries, warehousing capacity is finally loosening up, and firms are utilizing slightly more of the available transportation capacity to replenish those goods.

As has been the case for the last year, the overall economy continues to be somewhat mixed. UPS, JB Hunt, and Knight-Swift all missed on earnings in the first quarter. JB Hunt president Shelley Simpson admitted to analysts in a recent earnings call that we are currently in a freight recession (something that was called out in LMI reports from earlier this year), this is a far cry from the optimism many carriers were espousing back in January.

U.S. misery index lowest in two years.

  • Despite the gloomy outlook in the trucking industry, it should be pointed out that the U.S. misery index, the combined sum of inflation and unemployment rates, was down to 8.48 in March, the lowest in two years.
  • Despite the Fed’s program of interest rates – combined with the continued decline in aggregate supply costs – have slowing inflation, unemployment rates remain very positive. The Dow Jones industrial average rose 2.5% in April, which is the best month since January’s increase of 2.8%.

Future Predictions

Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now.

  • The future predictions for April continue the recent trend of respondents predicting relatively muted levels of growth across the logistics industry.
  • Respondents are anticipating that Inventory Levels will continue to come down over the next year, moderating Inventory Costs and Warehousing Prices.
  • They are not optimistic about Transportation Prices expanding, but the reading of 48.1 does suggest that respondents are at least expecting transportation markets to stabilize somewhat, something which would be welcome news for carriers.
  • As mentioned above, the freight market seems likely to remain depressed until the program of interest rates slow down and more confident spending leads to volumes being flowing more freely. 
  • Upstream (green bars) respondents are expecting growth (54.0) in the overall index while their Downstream (purple bars) counterparts predict contraction (48.4) over the next 12 months.- This is largely due to the significantly higher levels of Warehousing (52.2 to 63.5) and Transportation Capacity (55.9 to 73.0)
  • Downstream firms are expecting to come online, which they predict will lead to significantly lower Inventory Costs (47.3 to 63.2).
  • Both Upstream and Downstream firms expect overall Inventory Levels to decrease, the fact that Downstream firms believe this will happen for them at a lower cost and with more capacity available suggests that their inventories will remain somewhat dynamic – with higher rates of turnover than what we may see Upstream.

Results Overview

The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50.0 indicates that logistics is expanding; a reading below 50.0 is indicative of a shrinking logistics industry. The latest results of the LMI summarize the responses of supply chain professionals collected in April 2023.

About The Logistics Manager’s Index®
The Logistics Manager’s Index (LMI) is a joint project between researchers from Arizona State University, Colorado State University, University of Nevada, Reno, Florida Atlantic University, and Rutgers University, supported by CSCMP. It is authored by Zac Rogers Ph.D., Steven Carnovale Ph.D., Shen Yeniyurt Ph.D., Ron Lembke Ph.D., and Dale Rogers Ph.D.

Source: The LMI

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