After three consecutive months of contraction, the August Logistics Managers' Index (LMI) is back in the black. Last month's figure came in at 51.2, putting it in the growth category for the first time since April, and breaking a five month stretch in which new low scores were set. The August LMI is the highest since February.
So why the change to the good? Authors say there is increased activity across all the index sub-categories that cover inventory, warehousing and transportation. The biggest gain among these was in Inventory Costs, which were up 8.6 to 69.1, coinciding with slowing contraction in Inventory Levels, which gained 6 points to 47.9 and higher (+2.8 to 63.4) Warehousing Prices.
The transportation picture is also the best it's been in awhile, as Transportation Utilization's 8.2 point gain pulled the metric out of contraction to an even 50.0, while Transportation Prices slowed their contraction with a +7.3 to move the index figure up to 42.9 - that metric's highest reading in 11 months. Relatedly, Transportation Capacity was down 5.1 to 60.5, showing a bit more competition for shippers to deal with and no doubt directly connected to the shutdown of Yellow trucking.
LMI authors are not yet prepared to declare a full-on return to expansion in the freight and logistics marketplace, but August's numbers do show a continued increase in activity that began in late July. The writers go as far as saying their metrics along with other anecdotal evidence suggests that a move back towards continued expansion "is quite possible."
Those other bits of evidence include both U.S. wage and job growth, and the likely lack of another interest rate hike at the Federal Reserve meeting. Of course, then a question becomes: if transportation prices rise from their extended lows, will that contribute to another increase in inflation? Potentially.
Logistics pros who contributed to the LMI had their highest expectations for the index a year out, since last July, predicting the LMI would read 58.6 in 12 months - six points more optimistic than they were the month prior. Authors suggest the predictions are tied to expected continued slowdowns in capacity and growth in other areas - with the potential for inventory to build back up to normal levels in the coming months.
By the Numbers
See the summary of the August 2023 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 August 2023.
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