April 3, 2019

Logistics industry growth slows in March

Although still in positive territory, the Logistics Manager's Index fell in March, continuing a trend toward moderating growth across the industry, trade group reports.

By DC Velocity Staff

Business activity in the logistics sector continued to grow in March, although at a slower rate compared to February and year-ago levels, the Council of Supply Chain Management Professionals (CSCMP) said this week.

The trade group's Logistics Manager's Index (LMI) registered 60.4 in March, down from February's reading of 61.95 and down considerably compared to March 2018, when it registered 75.71. Despite the decline, the LMI remains above the 50-point mark indicating expansion in the logistics sector, according to the trade group's March Logistics Manager's Index Report.

Researchers said inventory levels and inventory costs were down sharply during the month—12.7 percent and 4.59 percent, respectively—indicating that firms are adding inventory but at slower levels than in the past. Warehousing trends and overall economic conditions may be driving the changes. Warehousing capacity held steady (up 1.42 percent to a reading of 50) in March, and warehouse prices were up, meaning that it has become more expensive to store inventory, so firms may be cutting back, the researchers said. Firms may be responding to an economic slowdown in the first quarter of 2019 as well, researchers also said.

"Whether inventories will be built back up if warehouse prices stabilize or consumer sentiment improves remains to be seen," according to CSCMP.

The researchers also highlighted transportation metrics, which they say have been the most dynamic over the history of the LMI. Transportation capacity is growing, but at a slightly slower rate compared with February, the report showed. Prior to this month's stabilization, the index had increased in every period since reaching a low point in March/April 2018, according to CSMP. The rate of growth for transportation costs has decreased for the fifth consecutive period, and at a reading of 65.5 is down considerably from its peak of 95.8 in March/April 2018, the report showed.

The LMI score is a combination of eight components that make up the logistics industry: inventory levels and costs; warehousing capacity, utilization and prices; and transportation capacity, utilization and prices. CSCMP conducts the monthly survey of more than 100 logistics executives in conjunction with researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada, Reno.

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