Logistics industry growth continues strong pace

Economic growth in the logistics industry slowed but maintained its strong pace in July, according to the latest Logistics Managers' Index (LMI) report, released this week.The LMI registered 74.5, down slightly from June’s reading of 75. This is the sixth straight month the index has come in above the 70-point mark, indicating strong expansion across the industry, according to LMI researchers. An LMI reading above 50 indicates growth in the sector; a reading below 50 indicates contraction.

“As we have seen for most of the last year, [July] LMI displays continued expansion in the logistics industry ...” according to the report. “While the rate of growth has decreased, it still represents the third-highest score in the history of the index and significant rate of expansion in the logistics industry. The growth in this month’s index is fueled by metrics from across the index, with all three price indices reading in at 88 or above.”

Warehousing prices rose 2.6 points to reach an all-time high of 88, fueled by a lack of available capacity nationwide. Warehousing capacity contracted for the 11th straight month, according to the report. Pricing and capacity factors have led to continued growth in warehouse utilization, which reached a rate of 70.5 in July.

Transportation prices grew in July as well, rising 3.8 points to a reading of 91. The researchers said this was driven by pressure from growing inventory levels, which remained well above the all-time average growth rate at a reading of 66.4 for the month. The high inventory levels are a result of tightness in other parts of the supply chain, and companies are dealing with the issue by “abandoning JIT principles and ordering earlier and in larger quantities to avoid stockouts,” according to the report.

Inventory costs continue to rise as well, reaching a reading of 88 during the month—down slightly from June’s all-time high of 89.4.

Logistics industry leaders polled for the monthly LMI indicate that current conditions are likely to continue over the next year. Respondents predicted a growth rate of 71.7 for the overall LMI, up nearly 8 points above the all-time high growth rate of 63.8. This represents a substantial rate of expected growth, the researchers said.

“The logistics industry remains tight, and based on future predictions and industry experts, seems likely to stay that way through the rest of the year,” according to the report.

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).

Visit the LMI website to participate in the monthly survey.