The gap between the leading Transportation Prices and trailing Transportation Capacity was the largest it’s been in 25 months in the July Logistics Managers’ Index (LMI). The prices metric gained 2.8 points to reach its highest mark (63.8) in two-plus years, while capacity grew slightly from June (+0.9) to 50.9.
The continued gap (that’s grown for three straight months) is good news for a potential end to the freight recession – as authors say these dynamics are expected to continue – even saying the freight recession is likely “moving towards its conclusion.” LMI authors, like many others, also continue to wait with bated breath for an interest rate cut from the Federal Reserve to help with supply driven inflation. The Fed has signaled a cut will likely occur soon, but one hasn’t happened yet.
The LMI itself came in at 56.5 for July, up 1.2 from June and more than 11 points higher than the same month in 2023. This places it firmly in the growth category, though behind its historical average by more than five points – showing the market is hardly humming just yet.
One obstacle is coming from retailers, as Inventory Levels remained in contraction for the second straight month, though the reading did gain 2.1 points from June to hit 49.5. Authors say retailers appear to be playing it safe with inventories until they’re sure demand returns. By the same token, manufacturers, wholesalers and distributors are building stock up as they anticipate that will in fact occur later this year. Inventory Costs remained high, rising 2.1 as well to make it the highest metric of July at 65.7.
Warehousing Prices lost its perch at the top, dropping 3.6 to 60.9, while Warehousing Utilization headed the opposite direction, gaining 5.3 to come in at 57.9 in July. Even with the growth in utilization, Warehousing Capacity was up 1.9 last month to 54.5, suggesting more space coming online even with growing usage – and showing a reason for the price drop.
Respondents in July were still optimistic for the next 12 months, though less so than the month prior. The projected July 2025 LMI came in at 62, down 4.1 from June’s even more rosy 66.1. The more muted prediction is powered by expectations of Transportation Capacity remaining about where it is now and Inventory Levels still showing some weakness over the next year, while Transportation Prices and Inventory Costs gain ground.
By the Numbers
See the summary of the July 2024 Logistics Managers’ Index, by the numbers:
About the Logistics Managers’ Index (LMI)
Researchers at 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) – issue the report. 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 July 2024.
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