Economic activity in the logistics sector expanded in December, but at its slowest rate in three years, according to the latest Logistics Manager's Index (LMI) report, released today.
The LMI, a monthly survey of logistics industry professionals, registered 54 in December, down slightly from its reading of 54.5 in November, but down considerably from its year-ago reading of 67. An LMI above 50 indicates expansion in the sector; a reading below 50 indicates contraction.
Declining inventory levels helped drive the lower December results.
"The drop is really driven by a big decrease in inventory levels ... [which] dropped down to 42.3, [marking] the first time we've seen active contraction in inventory," said LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University. Slowing growth in inventory levels is expected after the holiday shipping rush, but contraction is uncharacteristic, Rogers explained. He said the results point to an overall uncertainty in the marketplace and an expectation of slower economic growth as 2020 gets underway.
The LMI dropped below 60 for the first time last April and has remained there, slowing each month with the exception of last July, but remaining above the 50-point mark indicating growth in the sector.
"... the growth has just been very slow (and has been trending slower)," the researchers wrote in their December report. "It seems to indicate that the U.S. is currently in an uncertain economic time. While it is possible that we are through the 'soft patch' we hit last year, many CFOs are still concerned about a recession due to the ongoing trade wars and weakness in other parts of the world."
The LMI tracks logistics industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
Check the LMI website for past reports and to participate in the monthly survey.