FOR RELEASE: Tuesday, June 4th, 2024
Contact:
Zac Rogers, Ph.D.
Logistics Manager’s Index Analyst
Associate Professor, Supply Chain Management
Department of Management
Colorado State University
Fort Collins, Colorado
(970) 491-0890
E-mail: [email protected]
http://www.logisticsindex.org
Twitter: @LogisticsIndex
May 2024 Logistics Manager’s Index Report®
LMI® at 55.6
Growth is INCREASING AT AN INCREASING RATE for: Warehousing Capacity, Warehousing Utilization, Warehousing Prices, Transportation Utilization and Transportation Prices.
Growth is INCREASING AT A DECREASING RATE for: Inventory Costs and Transportation Capacity.
Inventory Levels are CONTRACTING.
LMI® at 55.6
Growth is INCREASING AT AN INCREASING RATE for: Warehousing Capacity, Warehousing Utilization, Warehousing Prices, Transportation Utilization and Transportation Prices.
Growth is INCREASING AT A DECREASING RATE for: Inventory Costs and Transportation Capacity.
Inventory Levels are CONTRACTING.
(Fort Collins, CO) — The Logistics Manager’s Index reads in at 55.6 in May of 2024, this is up (+2.7) from April’s reading of 52.9. With this reading the index has now expanded in 9 of the last 10 months and for the last six months in a row. The most notable change this month is Transportation Price which increased (+13.7) from contracting at 44.1 to expanding at 57.8 – their highest level since June of 2022. Transportation Prices are now slightly higher than Transportation Capacity which are down (-4.0) to 57.3. This is a marked change from April when capacity outstripped prices by 17.3-points. It is encouraging that Transportation Prices are expanding again and are mildly above Capacity. However, we have seen this a few times before in the past 6 months and it has been temporary every time. The freight recession that began in mid-2022 will not be over until Transportation Prices are consistent above Transportation Capacity.
The other significant change this month is Inventory Levels decreasing (-4.5) from mild growth at 51.0 to contraction at 46.5. However, it is worth noting that inventories did increase for Downstream firms (51.6) and contracted (44.2) Upstream. Despite this, Warehousing Utilization was up (+8.9) to 64.0. While this may seem at odds with contracting inventories, it is partially explained by a similar split between Downstream (69.4) and Upstream (61.3) respondents.
Similar to March’s report, we do read a slowdown in some metrics in the second half of the month, particularly for Inventory levels which moved from expansion (52.9) in early May to contraction (40.0) in later May, bringing with it cascading effects in warehousing metrics and the overall index.
Researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued this report today.
Results Overview
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 May 2024.
The LMI read in at 55.6 in May, up (+2.7) from May’s reading of 52.9. This marks the ninth of ten readings, and sixth consecutive reading of expansion in the overall index. As mentioned above, this increase was largely a function of positive movements in the transportation market and Warehousing Utilization. This expansion faced headwinds in the second half of the month however, particularly from Inventory Levels, which moved from expansion to contraction as May went on. Inventory Levels were the only metric to contract, with the other eight showing some level of expansion – including Transportation Prices, which had contracted in April.
This mixed bag is reflective of current macroeconomic conditions. For instance, the University of Michigan’s Consumer Sentiment Index had been highly positive and consistent – with the range of readings falling within 2.5 points of one another – throughout the first four months of 2024. In May however consumer sentiment was down 8.1 points to 69.1. While this is the lowest reading in the last five months, it is still 17.1% higher than the reading from the same time last year[1]. This slower but stead growth is reflected in U.S. Q1 GDP being revised down from 1.6 to 1.3% - both of which are much lower than the 3.4% growth that was seen in Q4. This was driven by consumer spending slowing from 3.3% to 2.0% year-over-year. While economic growth has clearly slowed, consumer prices were up 3.3% annually which is above the Fed’s target of 2.0%[2]. This has changed recently however, as the CPI showed only 0.2% inflation in April which was lower than the 0.3% in February and March[3]. The slower growth in spending is a factor behind the mild slowdown in inflation. Lower interest also led U.S. Treasury yields to their biggest drop in five months[4], and the Dow and S&P 500 jumped up as markets hope the cooling trend will eventually lead to a shift in interest policy[5].
As has been stated in past reports, cuts to interest rates will likely be beneficial to the overall logistics industry. A recent paper from the IMF and Harvard (which includes Larry Summers as a coauthor) shows that much of the gap between actual inflation and perceived inflation are due to high interest rates crunching the credit supply (and indirectly, limiting the stock of housing)[6]. For example, pending home sales fell to its lowest level in four years in April 2024 as high interest rates have scared off both would-be buyers and home builders[7]. If cuts are to happen in 2024, they will likely need to come even with inflation over 2%. The Federal Reserve Bank of Cleveland projects that at the current pace, inflation will not get back down to 2% until mid-2027[8]. Unfortunately for the pro-rate cutting group, Jerome Powell has stated that the Fed will need more than a quarter of data to determine whether inflation is approaching its preferred target of 2% as he is worried that premature cuts could lead to a revival of the inflation from 2022[9].
There is however likely to be a test cast of this approach in the Eurozone in June. The Eurozone economy moved back into growth in Q1 at a rate of 0.3%. This is up from the 0.1% contraction in Q4 of last year and is the strongest level of growth since 2022[10]. Eurozone inflation also picked up in May at a rate of 2.6% year-over-year. However, analysts believe that the slowness in the overall economy has lead the European Central Bank to conclude that inflation has slowed down enough (it is well below its peak of 10.6% in late 2022) and expect the bank to lower interest rates at their June meeting[11].
Looking to Asia, China is set to expand at a rate of 5% this year – up 0.4% from previous estimates[12]. However, analysts who had questioned whether this rate of growth was sustainable saw cracks this month as the Chinese manufacturing PMI dropped from 50.4 to 49.5 and into contraction. Chinese manufacturing has expanded in the last two months, but this was partially because output was exceeding orders – which is unsustainable[13]. Chinese manufacturing is likely to face increasing headwinds as U.S. consumer spending slows and the Biden administration continues its program of tariffs on goods like electric cars.
In contrast, India’s economy grew at 8.2% year-over-year, including a 7.6% clip in Q1, and will be the world’s fastest growing major economy this year[14]. However, it should be noted that much of this growth is due to government spending on things like infrastructure and manufacturing. Indian private consumption, while up 4%, is still lower than it was pre-pandemic due to slowness in the “informal” sector that is not captured in official government measures[15]. There is also continued slowness in China. The U.S. market is not where it was three years ago, or where the majority of people would like it to be now, but relative to the rest of the world there is some strength in the U.S.
One source of what has been continued strength can be seen in the warehousing sector. Warehousing Utilization was up significantly (+8.9) to 64.0 in May. The bulk of this expansion came in the first half of the month, when utilization expanded at a rate of 70.0. Downstream retailers were the other factor behind this expansion, outpacing their Upstream counterparts at a rate of 69.5 to 61.6. The largest Downstream user of last-mile logistics services, Amazon, is displaying confidence in the ecommerce market as it moves back into expansion with its distribution network. They have already moved on 16 million square feet of space in the U.S. as they add both large upstream, and smaller downstream warehouses to their portfolio in a bid to increase service levels while also holding costs down. This expansion is partly to compete with Walmart, who’s network of stores that are located close to consumers allowed it to ship 4.4 billion items as same- or next-day deliveries in the last 12 months[16]. This increased utilization has led to subsequent expansion in Warehousing Prices which are up (+1.2) to 64.9. The expansion in price in utilization appears to be more a function of increased demand than of restricted supply (which had been the case in much of 2022) since Warehousing Capacity continues to exhibit mild expansion. Capacity was up (+1.5) to 55.6 in May. A number in the mid-50’s is healthy for this metric as it represents a slow, sustainable expansion of available space.
It is interesting that warehousing showed the strength it did despite the dip in Inventory Levels, which dropped (-4.5) to contraction at a rate of 46.5. Inventories had been building in the early part of 2024 but have now dropped a combined 17.4 points from the 18-month high that was reported in March. This decrease is primarily driven by Upstream firms, which reported contraction of 44.2, contrasting with the slight expansion reported by Downstream firms at 51.6. As mentioned above, much of this contraction happened in the second half of May, as Inventory Levels dropped from 52.9 in the first half of the month to 40.0 in the second half. This is likely a combination of Upstream expansionary plans being blunted by interest rates and/or the recently announced tariffs on certain goods, and Downstream firms hewing to a strict JIT-inventory policy to keep costs low.
Imports make up a significant portion of U.S. inventories. U.S. imports were up 3.1% in April, and the goods trade deficit hit $99.4 billion – it’s highest level since 2022[17]. Imports are up partly because of improving conditions in the Panama Canal. In the last week of May the Panama Canal Authority announced that they were expanding sailings ahead of schedule. The canal is still not back to maximum capacity, but water levels are above of where they were at this time a year ago and officials are optimistic about sailings continuing to increase[18]. In contrast Maersk believes the ongoing disruptions in the Red Sea could continue for the rest of the year. Due to this, they expect increased sailings around the Cape of Good Hope to continue throughout 2024. This was announced along with their earnings, which are down 19% to $8.01 billion. This drop comes despite a 7.5% increase in volumes[19]. Unfortunately for ocean carriers, a 7.5% increase is not enough to absorb the excess levels of capacity that have come online over the past few years. Hapag-Lloyd on the other hand says that shipping demand is growing and freight rates are up. They raised end-of-year guidance, reporting volumes are up 14% from Q4 2023 to Q1 2024. They do warn however that the increase in spot-rates could either be an aberration or a sign that peak season will begin soon. We will find out either way later this summer.
Unfortunately, the tariffs that were recently announced by the Biden administration will almost certainly have an impact on the flow of, and price paid for, goods coming into the U.S. Several prominent importers including Apple, Walmart, and Target have released a statement through the Retail Industry Leaders Association (RLIA) denouncing the recent tariffs on Chinese exports from the Biden administration. The RLIA statement points out that the additional costs associated with tariffs will be particularly hard given the ongoing struggles some industries continue to experience with inflation[20]. The idea behind these tariffs is to reduce dependence on China in the long run. In the short run however, alternatives do not exist in the U.S. or abroad that will replace Chinese sources, meaning firms are likely to continue importing despite the tariffs and will likely pass a portion of the increased costs to their customers. As always, tariffs lead to retaliation. China is hitting back at U.S. tariffs by imposing export controls on aviation technology and components. These controls will impact goods that had seen approximately $1 billion in exports to the U.S. through the first four months of the year and could have a significant impact on some U.S. importers in the aviation industry[21]. Recently published research from some of the authors of this index found that the 2018 tariffs were financially damaging in to both the industries they were meant to protect as well as to their supply chain[22]. At this point, there is no reason to believe the short run outcomes for the 2024 tariffs will be any different, and we could see an increase in Inventory Costs. This would be a continuation of recent trends, where Inventory Costs have slowed (-3.3) but are still expanding at a solid rate of 65.2.
The transportation industry is still struggling, but displayed strength in May and dropped another hint that is continuing on its road (pun not intended) to recovery. The most important sign here is that Transportation Prices are up 13.7 points to 57.8. This is the highest reading for Transportation in two years when it read in at 61.3 in June of 2022 which was the second month of the ongoing freight recession. The price growth is a function of demand and not costs, as Diesel fuel prices dropped again in the last week of May to $3.758/gallon, down $0.097/gallon from the same time a year ago[23]. Prices are low partly because inventory of gasoline was up by 2 million barrels headed into Memorial Day weekend. Futures for July and August are at $81.81 and $82.09 per barrel respectively, so markets are anticipating stability even with OPEC+ expected to announce a continuation of their production cuts in early June[24]. Was also see that FreightWaves is reporting that tender volumes are up 9% from a year ago[25]. The issue is that even the 9% increase in volume is not enough to soak up the excess volume that remains in the market. This is because despite a drop (-4.0) Transportation Capacity is still expanding at a rate of 57.3. Available capacity has expanded in every month since March of 2022. It is unlikely that the freight market will move back into a true boom period unless some of that capacity begins to exit. To that end, it will be interesting to monitor the cash flow situation for carriers over the next few months as C.H. Robinson, RXO, and Forward Air have all been downgraded by S&P Global Ratings[26]. These three firms epitomize the cash flow issues that have plagued the industry that has been mired in a freight recession since mid-2022. That is not to say that any of these firms are at risk of dropping out of the market, but with the glory days of the most recent freight boom now two full years behind us, we would expect some capacity to contract soon.
Air freight is another story. Air cargo demand was up 11% in April and early reports show demand will be up in double digits in May as well, meaning that demand has increased substantially in every month of 2024. While this is in part due to issues in the Red Sea, the benchmarking platform Xeneta reports that air cargo is coming from all over the world[27]. FedEx announced it will rationalize air freight capacity in an attempt to right-size their fleet after experience 10 consecutive quarters of negative growth in U.S. package volume. The changes are expected to lead to $700 million in cost savings through 2025[28].
It is also worth mentioning the potential transportation issues in The U.S.’s second-largest trade partner, Canada. Canada continues to face the possibility of a strike as Teamsters at Canadian National Railway and Canada Pacific Kansas City that could lead to disruptions in the movement of over $1 billion in goods per day[29]. The Teamsters Union had previously set May 22nd as a strike date but pushed in back two months due to a needed regulatory ruling[30]. The news was not all bad in Canada in May, as approximately 750 truckers associated with Unifor ratified an agreement with CNTL to continue providing first- and last-mile services[31].
Essentially, transportation markets are improving, but are still not all the way back because there continue to be both bright and dark spots in the market. This is epitomized in Transportation Utilization, which was up (+2.8) in May to 59.2. Rates of utilization varied significantly across the supply chain this month. For instance, larger respondents reported Transportation Utilization expansion that was 9.7 points greater than smaller firms (64.2 to 54.5). This difference was even more pronounced when looking at the Upstream/Downstream split. Despite the contraction in Inventory Levels, Upstream firms reported mild rates of expansion at 55.1. Their Downstream counterparts however came in 14.2-points higher, reporting expansion at 69.4 which would be the highest reading in this metric since the boom-times of November 2021. Taken all together, this suggests that markets are recovering Downstream, but a full recovery is being held back by trepidation Upstream. Whether the reasons for that are interest rates, tariffs, too much capacity, or (most likely) a combination of all three is not clear. What is clear though, is that the freight market cannot recover unless the recovery is more evenly distributed across the supply chain.
Recently, there have been many comments in logistics media wondering when the long-anticipated turnaround might come; with the implication being that we have been expecting things to pick up, but so far, those expectations have not been met. It is worth comparing the current results to previous expectations to better understand where the future predictions (discussed below) might point to. For this exercise we are comparing future predictions from July of 2023 to the actual readings from this month. July of last year was chosen because that was when Yellow exited the market and expectations began to turn around – it was the first of the “better times are coming” readings for the LMI. The table below compares those predictions from 10 months ago to today’s readings. Looking at the numbers side by side they are remarkably similar, with an average difference of 1.4-points and an absolute average difference of 3.8. As was predicted, Inventory Levels are the only metric in contraction, and the rest are expanding. The actual overall LMI at the time was at 45.4 in July of 2023, which was the third consecutive month of contraction. At the time, a move back towards expansion at 52.8 was somewhat optimistic, yet 10 months later the overall index reads in at 55.6 – 2.8 points higher.
The logistics industry has been struggling for a full two years, and it is reasonable for folks to hope it gets back to growth soon. It is also important to keep where we were, and where we are now, in perspective. The logistics industry was in a deep hole after the twin shocks of COVID and the invasion of Ukraine and it was always going to take some time to dig our way out. Fortunately, as will be explained with the future predictions below, there may be a light at the end of the tunnel sooner rather than later.
Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now. Respondents continue to be largely optimistic about the future of the logistics industry, predicting an overall growth rate of 65.5. This is up (+2.8) from April’s future prediction of 62.7 and is the highest future prediction we have seen since two full years ago in May of 2022. The optimism in the overall index is driven by expectations for substantial growth in Inventory Levels (65.5) that will then lead to significant growth rates in the 70’s for Inventory Costs, Warehousing Utilization, Warehousing Prices, and Transportation Prices. Meanwhile, Warehousing and Transportation Capacity are both predicted to land in the 50’s (56.2 and 50.9 – nearly no growth – respectively).
Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now. Respondents continue to be largely optimistic about the future of the logistics industry, predicting an overall growth rate of 65.5. This is up (+2.8) from April’s future prediction of 62.7 and is the highest future prediction we have seen since two full years ago in May of 2022. The optimism in the overall index is driven by expectations for substantial growth in Inventory Levels (65.5) that will then lead to significant growth rates in the 70’s for Inventory Costs, Warehousing Utilization, Warehousing Prices, and Transportation Prices. Meanwhile, Warehousing and Transportation Capacity are both predicted to land in the 50’s (56.2 and 50.9 – nearly no growth – respectively).
Future expectations are incredibly consistent across the supply chain, as we see virtually no difference in the predictions of our Upstream respondents (green bars) and their Downstream (purple bars). Similar to what we saw in April, both groups of respondents predicted expansion across nearly every metric over the next 12 months. The exception is in Transportation Capacity, which Upstream respondents predict will increase slightly (51.3) but Downstream firms predict will hold steady (50.0). The notion that Transportation Capacity will hold close to steady while Transportation Prices increase significantly (69.9 Upstream and 70.3 Downstream) is encouraging as it suggests that the expected increase in freight demand over the next year will soak up the remainder of the excess capacity, putting the market back into balance for the first time in years.
Future expectations are incredibly consistent across the supply chain, as we see virtually no difference in the predictions of our Upstream respondents (green bars) and their Downstream (purple bars). Similar to what we saw in April, both groups of respondents predicted expansion across nearly every metric over the next 12 months. The exception is in Transportation Capacity, which Upstream respondents predict will increase slightly (51.3) but Downstream firms predict will hold steady (50.0). The notion that Transportation Capacity will hold close to steady while Transportation Prices increase significantly (69.9 Upstream and 70.3 Downstream) is encouraging as it suggests that the expected increase in freight demand over the next year will soak up the remainder of the excess capacity, putting the market back into balance for the first time in years.
As has been the case for the last three months, in May we saw significant differences between responses from early (gold bars) and late (green bars) in the month. The differences in May were like March but unlike April in that things slowed down a bit at the beginning of the month. Inventory Levels expanded at a rate of 52.9 in early May before contracting (40.0) in the back half of the month. As one would expect, this led to a slowdown in the rates of expansion for Inventory Costs (72.0 to 58.2), Warehousing Utilization (70.0 to 58.0), Warehousing Prices (70.8 to 59.2), and an increase in the expansion of Transportation Capacity (50.9 – nearly no change, to 64.2). These shifts also pushed the LMI to a significantly rate of slower growth at 51.7, which was down from 59.5 earlier in the month. The patterns in May are similar to March and flipped from April, but the oscillations are much less volatile this month. Other than Inventory Levels, no other metric moved into contraction, which is a far cry from the wild swings of the two previous months. The volatility of the last three months likely represents the expected growing pains of an industry that is transitioning from a period of sustained contraction back to growth. Progress is not linear, and there are ups and downs on the road back to growth. Fortunately however, those ups and downs do not appear to be as severe as they had been earlier in the year.
In May we saw a few key differences in the feedback from Upstream (blue bars) and Downstream (orange bars) respondents. Upstream firms added inventory more quickly than their Downstream counterparts in February and March and at a roughly even pace in April. This shifted in May as Upstream Inventory Levels contracted (44.2) while Downstream inventories expanded slightly (51.6). As a result of continued growth in Inventory Levels, Downstream firms also reported faster growth in Inventory Costs (70.3 to 62.7), Warehousing Utilization (69.4 to 61.6), and significantly faster growth in Transportation Utilization (69.4 to 55.1).
As noted above, Upstream Inventory Levels have oscillated up and down throughout 2024. Downstream retailers however have roughly maintained JIT policies in which goods are replaced as soon as they are sold. This has led to greater stability throughout 2024 and more efficient utilization of available capacity in May for Downstream respondents.
As noted above, Upstream Inventory Levels have oscillated up and down throughout 2024. Downstream retailers however have roughly maintained JIT policies in which goods are replaced as soon as they are sold. This has led to greater stability throughout 2024 and more efficient utilization of available capacity in May for Downstream respondents.
May’s differences between larger firms (those with 1,000 employees or more, represented by gold lines) and smaller firms (those with 0-999 employees, represented by maroon lines) is similar to the Upstream/Downstream split discussed above. Like Upstream/Downstream, the largest and most statistically significant difference between the two groups is in Transportation Utilization (54.5 for smaller and 64.2 for larger respondents). Unlike Upstream/Downstream, firms of both sizes saw small contractions in Inventory Levels (45.1 for smaller and 48.0 for larger respondents), and similar logistics costs across the board.
The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. The rate of expansion for the overall index is up (+2.7) to 55.6. This increased pace of growth is primarily driven by expansion in Transportation Prices and Warehousing Utilization. As a headwind, we see Inventory Levels moving from slight expansion at 51.0 to contraction at 46.5. Inventory Levels is the only one of our eight metrics to be in contraction this month.
The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. The rate of expansion for the overall index is up (+2.7) to 55.6. This increased pace of growth is primarily driven by expansion in Transportation Prices and Warehousing Utilization. As a headwind, we see Inventory Levels moving from slight expansion at 51.0 to contraction at 46.5. Inventory Levels is the only one of our eight metrics to be in contraction this month.
Historic Logistics Managers’ Index Scores
This period’s along with prior readings from the last two years of the LMI are presented table below:
This period’s along with prior readings from the last two years of the LMI are presented table below:
LMI®
The overall index reads in at 55.6 in May, up (+2.7) from April’s reading of 52.9. Despite the jump, this is slightly lower than the three readings from Q1 of this year. This month’s reading would have been the third highest in all of 2023, so while it is not quite where we were in March, it still represents progress. This progress is especially clear when compared to the reading from a year ago in May of 2023 when the overall index read in at 47.3 in what would be the first of three consecutive months of contraction which are the only instances contraction in the history of the index. The overall index has largely picked up due to strengthening across the transportation metrics, particularly Transportation Prices which are up (+13.7) to their highest reading since June of 2022 at the start of the current freight recession. Inventory Levels were down significantly in the second half of the month however (-12.9), which led to a cascading effect that slowed the growth of the overall index from 59.5 in the first half of May (which would have been the highest reading in 21 months), to 51.7 which is a more muted rate of expansion. It will be important to continue monitoring the overall index in June to see if this downward trend continues, or if activity picks back up at the end of Q2.
When asked to predict what conditions will be over the next 12 months respondents foresee a rate of expansion of 65.5, up (+2.8) from April’s future prediction of 62.7. May’s future prediction is the most optimistic outlook from our respondents in two years of reports. The logistics industry is not all the way back to a boom, but based on these predictions respondents seem to be optimistic. Future predictions are consistent across the supply chain, with Upstream firms predicting an expansion rate of 65.4 and Downstream predicting expansion of 66.4.
The overall index reads in at 55.6 in May, up (+2.7) from April’s reading of 52.9. Despite the jump, this is slightly lower than the three readings from Q1 of this year. This month’s reading would have been the third highest in all of 2023, so while it is not quite where we were in March, it still represents progress. This progress is especially clear when compared to the reading from a year ago in May of 2023 when the overall index read in at 47.3 in what would be the first of three consecutive months of contraction which are the only instances contraction in the history of the index. The overall index has largely picked up due to strengthening across the transportation metrics, particularly Transportation Prices which are up (+13.7) to their highest reading since June of 2022 at the start of the current freight recession. Inventory Levels were down significantly in the second half of the month however (-12.9), which led to a cascading effect that slowed the growth of the overall index from 59.5 in the first half of May (which would have been the highest reading in 21 months), to 51.7 which is a more muted rate of expansion. It will be important to continue monitoring the overall index in June to see if this downward trend continues, or if activity picks back up at the end of Q2.
When asked to predict what conditions will be over the next 12 months respondents foresee a rate of expansion of 65.5, up (+2.8) from April’s future prediction of 62.7. May’s future prediction is the most optimistic outlook from our respondents in two years of reports. The logistics industry is not all the way back to a boom, but based on these predictions respondents seem to be optimistic. Future predictions are consistent across the supply chain, with Upstream firms predicting an expansion rate of 65.4 and Downstream predicting expansion of 66.4.
Inventory Levels
The Inventory Level index read in at 64.5, down (-4.5) from April’s reading of 51.0 and 17.2 points below March’s reading of 63.8 (which was an 18-month high). This month, Upstream respondents returned a value of 44.2, reflecting a decline, while Downstream respondents returned a value of 51.6, indicating an increase. Early respondents (from the first half of the month) returned a value of 52.9, a slight increase, while later respondents reported a substantial decrease at 40.0. We saw a similar phenomenon last month, when early respondents reported significantly higher inventory levels than later respondents. However, last month, both groups reported increasing levels.
When asked to predict what conditions will be like 12 months from now, the average value is 65.5, up (+3.5) from April’s future prediction of 62.0. Upstream respondents returned 64.0, while Downstream respondents returned 68.8. So both Upstream and Downstream firms expect inventories to be increased over the next year.
The Inventory Level index read in at 64.5, down (-4.5) from April’s reading of 51.0 and 17.2 points below March’s reading of 63.8 (which was an 18-month high). This month, Upstream respondents returned a value of 44.2, reflecting a decline, while Downstream respondents returned a value of 51.6, indicating an increase. Early respondents (from the first half of the month) returned a value of 52.9, a slight increase, while later respondents reported a substantial decrease at 40.0. We saw a similar phenomenon last month, when early respondents reported significantly higher inventory levels than later respondents. However, last month, both groups reported increasing levels.
When asked to predict what conditions will be like 12 months from now, the average value is 65.5, up (+3.5) from April’s future prediction of 62.0. Upstream respondents returned 64.0, while Downstream respondents returned 68.8. So both Upstream and Downstream firms expect inventories to be increased over the next year.
Inventory Costs
Inventory costs read in at 65.2, down (-3.3) from April’s reading of 68.5, but relatively in line with March’s reading of 66.8. Comparing the graphs for Inventory Levels and Inventory Costs, the two obviously move closely in tandem. Inventory costs are primarily driven by two factors: the amount of inventory, and the cost of holding a given amount of inventory, and the latter is strongly driven by the interest rate at which companies can borrow the money necessary to finance the inventory. However, interest rates have remained unchanged since August of 2023, so it has been nearly a year since interest rates increased, so the financing cost of holding a given amount of inventory has not changed for a long time. However, driven by supply and demand, warehousing utilization and prices have continued to increase, driving increased inventory costs, apparently. Both Upstream and Downstream reported increased inventory costs, but Upstream reported 62.7, and Downstream reported 70.3. It is also worth noting that Early respondents reported higher cost levels at 72.0, while later respondents reported 58.2, a statistically significant difference.
Predictions for future Inventory Cost growth is 77.0, up (+4.5) from April’s future prediction of 72.5 representing a significant expectation of growth. This significant expansion is expected evenly across the supply chain, with Upstream (76.5) and Downstream (78.1) firms predicting similar rates of growth.
Inventory costs read in at 65.2, down (-3.3) from April’s reading of 68.5, but relatively in line with March’s reading of 66.8. Comparing the graphs for Inventory Levels and Inventory Costs, the two obviously move closely in tandem. Inventory costs are primarily driven by two factors: the amount of inventory, and the cost of holding a given amount of inventory, and the latter is strongly driven by the interest rate at which companies can borrow the money necessary to finance the inventory. However, interest rates have remained unchanged since August of 2023, so it has been nearly a year since interest rates increased, so the financing cost of holding a given amount of inventory has not changed for a long time. However, driven by supply and demand, warehousing utilization and prices have continued to increase, driving increased inventory costs, apparently. Both Upstream and Downstream reported increased inventory costs, but Upstream reported 62.7, and Downstream reported 70.3. It is also worth noting that Early respondents reported higher cost levels at 72.0, while later respondents reported 58.2, a statistically significant difference.
Predictions for future Inventory Cost growth is 77.0, up (+4.5) from April’s future prediction of 72.5 representing a significant expectation of growth. This significant expansion is expected evenly across the supply chain, with Upstream (76.5) and Downstream (78.1) firms predicting similar rates of growth.
Warehousing Capacity
The Warehousing Capacity index was up slightly (+1.6) to 54.0, continuing the upward trend from last month. his reading is down 1.1 points from the reading one year ago, and also up 9.3 points from the reading two years ago. In addition, there was a 1.9-point split between Upstream (55.0) and Downstream (56.9) which was not statistically significant (p<.1). Comparing the differences between small (<999 employees) and large (>999 employees), we see that these values are 52.0 and 59.2, respectively. This 7.2 percentage point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now respondents expect Warehouse Capacity to expand at a rate of 56.2, this is down slightly (-2.0) from April’s future prediction of 58.2. Upstream respondents are predicting slightly (though non-significantly) slower rates of growth in future Warehousing Capacity than Downstream respondents (55.1 to 58.9)
The Warehousing Capacity index was up slightly (+1.6) to 54.0, continuing the upward trend from last month. his reading is down 1.1 points from the reading one year ago, and also up 9.3 points from the reading two years ago. In addition, there was a 1.9-point split between Upstream (55.0) and Downstream (56.9) which was not statistically significant (p<.1). Comparing the differences between small (<999 employees) and large (>999 employees), we see that these values are 52.0 and 59.2, respectively. This 7.2 percentage point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now respondents expect Warehouse Capacity to expand at a rate of 56.2, this is down slightly (-2.0) from April’s future prediction of 58.2. Upstream respondents are predicting slightly (though non-significantly) slower rates of growth in future Warehousing Capacity than Downstream respondents (55.1 to 58.9)
Warehousing Utilization
The Warehousing Utilization index read in at 64.0 points for the month of May 2024, reflecting a sizeable 8.9-point increase from the month prior (thus erasing the previous month’s sharp decrease). This reading is up 9.3 points from the reading one year ago, and down 8.9 points from the reading two years ago. In addition, there was a 7.8-point split between Upstream (61.6) and Downstream (69.4) which was not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999 employees) we see that these values are 66.0 and 62.0, respectively. This 4.0-point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Utilization to increase at a rate of 75.0, up significantly (+9.2) from April’s future prediction of 65.8. Perhaps reflecting their expectation of slightly tighter capacity, Upstream expectations are slightly higher than their Downstream counterparts (76.8 to 71.0).
The Warehousing Utilization index read in at 64.0 points for the month of May 2024, reflecting a sizeable 8.9-point increase from the month prior (thus erasing the previous month’s sharp decrease). This reading is up 9.3 points from the reading one year ago, and down 8.9 points from the reading two years ago. In addition, there was a 7.8-point split between Upstream (61.6) and Downstream (69.4) which was not statistically significant (p>.1). Comparing the differences between small (<999 employees) and large (>999 employees) we see that these values are 66.0 and 62.0, respectively. This 4.0-point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Utilization to increase at a rate of 75.0, up significantly (+9.2) from April’s future prediction of 65.8. Perhaps reflecting their expectation of slightly tighter capacity, Upstream expectations are slightly higher than their Downstream counterparts (76.8 to 71.0).
Warehousing Prices
The Warehousing Price index read in at 64.9 points for the month of May 2024, which is up 1.2 points from the reading last month. This reading is down 2.1 points from the reading one year ago, and also down a sizable 22.6 points from the reading two years ago. In addition, there was a 0.2-point split between Upstream (65.0) and Downstream (64.8) which was not statistically significant (p>.1 Comparing the differences between small (<999 employees) and large (>999 employees) we see that these values are 67.7 and 62.5, respectively. This 5.2-point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Prices to increase at a rate of 75.8, up (+6.0) from April’s future prediction of 69.8, but close to March’s prediction of 74.5. Similar to the other two warehousing metrics future Upstream respondents are predicting a slightly tighter storage market than their Downstream counterparts (77.5 to 71.4). While none of the differences are statistically significant, that fact that they are all consistent in direction gives us confidence that Upstream respondents are predicting more activity in warehousing over the next 12 months.
The Warehousing Price index read in at 64.9 points for the month of May 2024, which is up 1.2 points from the reading last month. This reading is down 2.1 points from the reading one year ago, and also down a sizable 22.6 points from the reading two years ago. In addition, there was a 0.2-point split between Upstream (65.0) and Downstream (64.8) which was not statistically significant (p>.1 Comparing the differences between small (<999 employees) and large (>999 employees) we see that these values are 67.7 and 62.5, respectively. This 5.2-point split was not statistically significant (p >.1).
When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Prices to increase at a rate of 75.8, up (+6.0) from April’s future prediction of 69.8, but close to March’s prediction of 74.5. Similar to the other two warehousing metrics future Upstream respondents are predicting a slightly tighter storage market than their Downstream counterparts (77.5 to 71.4). While none of the differences are statistically significant, that fact that they are all consistent in direction gives us confidence that Upstream respondents are predicting more activity in warehousing over the next 12 months.
Transportation Capacity
The Transportation Capacity Index registered 57.3 percent in May 2024. This constitutes a drop of 4.1 points from last month’s reading. The Upstream Transportation Capacity index is at 57.1, while the Downstream index is at 58.1, a difference that is not statistically significant. Hence, the drop in Transportation Capacity was felt throughout the supply chain, suggesting that freight markets very gradually tightening.
The future Transportation Capacity index is also down 1.1 points, now indicating 50.9, remaining barely above the critical threshold and continuing to indicate expectations of very slight Transportation Capacity expansion over the next 12 months. The Downstream future Transportation Capacity index is at 50.0 while the Upstream future Transportation Capacity index indicates 51.3. However, this difference is not statistically significant.
The Transportation Capacity Index registered 57.3 percent in May 2024. This constitutes a drop of 4.1 points from last month’s reading. The Upstream Transportation Capacity index is at 57.1, while the Downstream index is at 58.1, a difference that is not statistically significant. Hence, the drop in Transportation Capacity was felt throughout the supply chain, suggesting that freight markets very gradually tightening.
The future Transportation Capacity index is also down 1.1 points, now indicating 50.9, remaining barely above the critical threshold and continuing to indicate expectations of very slight Transportation Capacity expansion over the next 12 months. The Downstream future Transportation Capacity index is at 50.0 while the Upstream future Transportation Capacity index indicates 51.3. However, this difference is not statistically significant.
Transportation Utilization
The Transportation Utilization Index is up 2.8 points from last month, indicating 59.2 in May 2024. The Downstream Transportation Utilization Index is now at 69.4, while the Upstream index is now at 55.1. This difference is statistically significant, indicating that transportation activity is intensifying more rapidly Downstream than Upstream. We saw a similar dynamic for larger firms, which saw Transportation Utilization expand at a rate of 64.2, relative to the more moderate expansion of 54.5 from smaller firms. Taken together, this suggests that firms that: a) cater to the consumer; b) have more access to cash; or c) both are more active in the freight market than firms who do not meet any of those criteria.
The future Transportation Utilization Index changed very little and continues to indicate expansion at 67.4 level for the next 12 months. The Upstream Transportation Utilization index is at 65.4 while the Downstream index is at 72.6. This difference mirrors the current situations with the Upstream and Downstream transportation activity however, the difference in future expectations is not statistically significant.
The Transportation Utilization Index is up 2.8 points from last month, indicating 59.2 in May 2024. The Downstream Transportation Utilization Index is now at 69.4, while the Upstream index is now at 55.1. This difference is statistically significant, indicating that transportation activity is intensifying more rapidly Downstream than Upstream. We saw a similar dynamic for larger firms, which saw Transportation Utilization expand at a rate of 64.2, relative to the more moderate expansion of 54.5 from smaller firms. Taken together, this suggests that firms that: a) cater to the consumer; b) have more access to cash; or c) both are more active in the freight market than firms who do not meet any of those criteria.
The future Transportation Utilization Index changed very little and continues to indicate expansion at 67.4 level for the next 12 months. The Upstream Transportation Utilization index is at 65.4 while the Downstream index is at 72.6. This difference mirrors the current situations with the Upstream and Downstream transportation activity however, the difference in future expectations is not statistically significant.
Transportation Prices
The Transportation Prices Index indicates 57.8 in May 2024, which corresponds to a large jump of 13.7 points from the previous month. With this large increase, the Transportation Prices moved back into expansion territory, signaling the return of inflationary pressures in transportation costs. These inflationary pressures are uniformly felt across the supply chains, with both Upstream and Downstream indexes also indicating 57.8 for the month of May. This reading marks the continuation of a comeback for Transportation Price movements. It is the highest reading for this metric since June of 2022 and the fourth of five months to show expansion after what had been over a year and a half of contraction.
The future index for Transportation Prices is now at 70.0 points and continues to indicate expectations of higher Transportation Prices in the next 12 months. The Downstream Transportation Prices index is at 70.3 while the Upstream Transportation Prices index is at 69.9. So, despite a slight drop seen in the future price index from the previous month, expectations of higher Transportation Prices over the next year are still spread relatively uniformly both Upstream and Downstream, across the supply chain.
The Transportation Prices Index indicates 57.8 in May 2024, which corresponds to a large jump of 13.7 points from the previous month. With this large increase, the Transportation Prices moved back into expansion territory, signaling the return of inflationary pressures in transportation costs. These inflationary pressures are uniformly felt across the supply chains, with both Upstream and Downstream indexes also indicating 57.8 for the month of May. This reading marks the continuation of a comeback for Transportation Price movements. It is the highest reading for this metric since June of 2022 and the fourth of five months to show expansion after what had been over a year and a half of contraction.
The future index for Transportation Prices is now at 70.0 points and continues to indicate expectations of higher Transportation Prices in the next 12 months. The Downstream Transportation Prices index is at 70.3 while the Upstream Transportation Prices index is at 69.9. So, despite a slight drop seen in the future price index from the previous month, expectations of higher Transportation Prices over the next year are still spread relatively uniformly both Upstream and Downstream, across the supply chain.
About This Report
The data presented herein are obtained from a survey of logistics supply executives based on information they have collected within their respective organizations. LMI® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.
Data and Method of Presentation
Data for the Logistics Manager’s Index is collected in a monthly survey of leading logistics professionals. The respondents are CSCMP members working at the director-level or above. Upper-level managers are preferable as they are more likely to have macro-level information on trends in Inventory, Warehousing and Transportation trends within their firm. Data is also collected from subscribers to both DC Velocity and Supply Chain Quarterly as well. Respondents hail from firms working on all six continents, with the majority of them working at firms with annual revenues over a billion dollars. The industries represented in this respondent pool include, but are not limited to: Apparel, Automotive, Consumer Goods, Electronics, Food & Drug, Home Furnishings, Logistics, Shipping & Transportation, and Warehousing.
Respondents are asked to identify the monthly change across each of the eight metrics collected in this survey (Inventory Levels, Inventory Costs, Warehousing Capacity, Warehousing Utilization, Warehousing Prices, Transportation Capacity, Transportation Utilization, and Transportation Prices). In addition, they also forecast future trends for each metric ranging over the next 12 months. The raw data is then analyzed using a diffusion index. Diffusion Indexes measure how widely something is diffused or spread across a group. The Bureau of Labor Statistics has been using a diffusion index for the Current Employment Statics program since 1974, and the Institute for Supply Management (ISM) has been using a diffusion index to compute the Purchasing Managers Index since 1948. The ISM Index of New Orders is considered a Leading Economic Indicator.
We compute the Diffusion Index as follows:
PD = Percentage of respondents saying the category is Declining,
PU = Percentage of respondents saying the category is Unchanged,
PI = Percentage of respondents saying the category is Increasing,
Diffusion Index = 0.0 * PD + 0.5 * PU + 1.0 * PI
For example, if 25 say the category is declining, 38 say it is unchanged, and 37 say it is increasing, we would calculate an index value of 0*0.25 + 0.5*0.38 + 1.0*0.37 = 0 + 0.19 + 0.37 = 0.56, and the index is increasing overall. For an index value above 0.5 indicates the category is increasing, a value below 0.5 indicates it is decreasing, and a value of 0.5 means the category is unchanged. When a full year’s worth of data has been collected, adjustments will be made for seasonal factors as well.
Logistics Managers Index
Requests for permission to reproduce or distribute Logistics Managers Index Content can be made by contacting in writing at: Dale S. Rogers, WP Carey School of Business, Tempe, Arizona 85287, or by emailing [email protected] Subject: Content Request.
The authors of the Logistics Managers Index shall not have any liability, duty, or obligation for or relating to the Logistics Managers Index Content or other information contained herein, any errors, inaccuracies, omissions, or delays in providing any Logistics Managers Index Content, or for any actions taken in reliance thereon. In no event shall the authors of the Logistics Managers Index be liable for any special, incidental, or consequential damages, arising out of the use of the Logistics Managers Index. Logistics Managers Index, and LMI® are registered trademarks.
About The Logistics Manager’s Index®
The Logistics Manager’s Index (LMI) is a joint project between researchers from Arizona State University, Colorado State University, University of Nevada, Reno, Florida Atlantic University, and Rutgers University, supported by CSCMP. It is authored by Zac Rogers Ph.D., Steven Carnovale Ph.D., Shen Yeniyurt Ph.D., Ron Lembke Ph.D., and Dale Rogers Ph.D.
The data presented herein are obtained from a survey of logistics supply executives based on information they have collected within their respective organizations. LMI® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.
Data and Method of Presentation
Data for the Logistics Manager’s Index is collected in a monthly survey of leading logistics professionals. The respondents are CSCMP members working at the director-level or above. Upper-level managers are preferable as they are more likely to have macro-level information on trends in Inventory, Warehousing and Transportation trends within their firm. Data is also collected from subscribers to both DC Velocity and Supply Chain Quarterly as well. Respondents hail from firms working on all six continents, with the majority of them working at firms with annual revenues over a billion dollars. The industries represented in this respondent pool include, but are not limited to: Apparel, Automotive, Consumer Goods, Electronics, Food & Drug, Home Furnishings, Logistics, Shipping & Transportation, and Warehousing.
Respondents are asked to identify the monthly change across each of the eight metrics collected in this survey (Inventory Levels, Inventory Costs, Warehousing Capacity, Warehousing Utilization, Warehousing Prices, Transportation Capacity, Transportation Utilization, and Transportation Prices). In addition, they also forecast future trends for each metric ranging over the next 12 months. The raw data is then analyzed using a diffusion index. Diffusion Indexes measure how widely something is diffused or spread across a group. The Bureau of Labor Statistics has been using a diffusion index for the Current Employment Statics program since 1974, and the Institute for Supply Management (ISM) has been using a diffusion index to compute the Purchasing Managers Index since 1948. The ISM Index of New Orders is considered a Leading Economic Indicator.
We compute the Diffusion Index as follows:
PD = Percentage of respondents saying the category is Declining,
PU = Percentage of respondents saying the category is Unchanged,
PI = Percentage of respondents saying the category is Increasing,
Diffusion Index = 0.0 * PD + 0.5 * PU + 1.0 * PI
For example, if 25 say the category is declining, 38 say it is unchanged, and 37 say it is increasing, we would calculate an index value of 0*0.25 + 0.5*0.38 + 1.0*0.37 = 0 + 0.19 + 0.37 = 0.56, and the index is increasing overall. For an index value above 0.5 indicates the category is increasing, a value below 0.5 indicates it is decreasing, and a value of 0.5 means the category is unchanged. When a full year’s worth of data has been collected, adjustments will be made for seasonal factors as well.
Logistics Managers Index
Requests for permission to reproduce or distribute Logistics Managers Index Content can be made by contacting in writing at: Dale S. Rogers, WP Carey School of Business, Tempe, Arizona 85287, or by emailing [email protected] Subject: Content Request.
The authors of the Logistics Managers Index shall not have any liability, duty, or obligation for or relating to the Logistics Managers Index Content or other information contained herein, any errors, inaccuracies, omissions, or delays in providing any Logistics Managers Index Content, or for any actions taken in reliance thereon. In no event shall the authors of the Logistics Managers Index be liable for any special, incidental, or consequential damages, arising out of the use of the Logistics Managers Index. Logistics Managers Index, and LMI® are registered trademarks.
About The Logistics Manager’s Index®
The Logistics Manager’s Index (LMI) is a joint project between researchers from Arizona State University, Colorado State University, University of Nevada, Reno, Florida Atlantic University, and Rutgers University, supported by CSCMP. It is authored by Zac Rogers Ph.D., Steven Carnovale Ph.D., Shen Yeniyurt Ph.D., Ron Lembke Ph.D., and Dale Rogers Ph.D.
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