Economic activity in the logistics industry slowed in October, continuing a moderating growth trend that began earlier this year, according to the monthly Logistics Manager’s Index (LMI) report, released today.
The LMI registered 57.5, its lowest reading since May 2020, when the height of the pandemic ushered in an era of exceptionally strong growth in demand for logistics services. Although slowing, the monthly index still indicates industry expansion, as an LMI reading above 50 indicates growth, and an LMI below 50 indicates contraction across logistics markets. The LMI had remained in the upper 60s and 70s range throughout the pandemic, falling to the low 60s and high 50s for the past four months.
The change continues to be driven by a slowdown in transportation markets and a glut of inventory that is driving up costs.
“Overall, the LMI is down (-3.9) from September’s reading of 61.4,” the LMI researchers wrote in their monthly report. “Like September, transportation metrics continue to be a drag on the logistics industry, while inventories remain high, warehouses remain full, and they both remain expensive.”
The transportation capacity index edged up 1.3 points compared to September to a reading of 73.1; this is the highest such reading in the history of the index, exceeding the freight recession of 2019 and marking a new low in the downturn being felt in transportation, the researchers wrote. Transportation prices fell for the sevent straight month, declining more than two points from September to a reading of 42.2.
“This is the lowest reading for this metric since April 2020, suggesting that the last time transportation prices fell this quickly was when the world was essentially shut down,” the researchers wrote.
Inventories grew in October, but at a slower pace from previous months. At 65.5, the inventory levels index was more than six points lower than September and marked the slowest rate of growth since December 2021. Warehousing capacity continued to contract, but remained on par with September’s level, registering 44.7. Both inventory costs and warehousing prices increased in October, rising to 80.9 and 75.5, respectively–figures that represent considerable expansion in both areas and indicate high costs for both inventory and warehousing throughout the supply chain.
However, the slower pace of inventory growth indicates that companies are doing a good job of getting through the inventory bubble that has existed for much of this year, according to LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University. But Rogers said it will take until early 2023 to see just how much progress has been made.
“It’s encouraging that we are down to the slowest rate of [inventory] growth,” Rogers said in an interview Tuesday. “We’re in a better place than we’ve been. It’s progress–that’s what I’d say.”
The LMI report is based on a monthly survey of North American logistics industry professionals. It 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 web page for information on participating in the monthly survey. Visit the LMI web page for information on participating in the monthly survey.
