Supply Chain Matters provides highlights of the March Logistics Manager Index which indicates that U.S. freight rates have reached their lowest levels in nearly six years.


U.S. Logistics Manager Index (LMI)

The Logistics Managers Index Report®, compiled by researchers at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP), reported a March 2023 value of 54.1, 0.6 percentage points below the February value of 54.7, and 3.5 percentage points down from the January reading of 57.6.

What was eye catching in the report was that the March reading the was the lowest in the six and one-half year existence of the LMI index. In essence, it is confirmation of a freight recession condition.

The sub-index index Transportation Utilization of 50 was noted as indicating no upward movement for the first time in 2023. With the Inventory Level index continuing to grow, the sense of the March report is that there was no inventory replenishment cycle in the first quarter, and there may not be one in the second quarter as well. Panelists reportedly pointed to a more pessimistic outlook for transportation utilization for the remainder of this year

From our lens, the picture of the report is that not only is an overall contraction of freight demand, but continued high inventory and warehouse capacity utilization is leading to increased inventory storage costs. That is not good for retailers and manufacturers, each under the looking glass to reduce not only transportation but also inventory carrying costs. Panelists reportedly indicated that inventories would continue to build moving forward, but at a more modest rate.

A chart depicting Aggregate Logistics Costs Over the Last 3 Years does provide good news for shippers and importers in the depiction of a trend indicating that since May 2022, aggregate logistics costs have plummeted to near April 2020 levels.

That trend is obviously not so good news for transportation and logistics asset providers in that the drop is approaching breakeven cost levels, which implies asset utilization at an operating loss.

Separate U.S. government data indicates that trucking employment in March declined at the most significant rate since the early days of the pandemic.

Our Supply Chain Matters highlights of March and Q1-2023 PMI global and regional indices indicate a state of contraction levels in production and materials procurement that is likely to continue as product demand levels remain muted on a global wide basis.



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