Two years ago, the freight market was coming down from a lengthy pandemic-related peak. After dipping considerably and staying low for quite awhile, the September Logistics Managers' Index (LMI) suggests things are headed back to normal. Last month's LMI hit a two-year high at 58.6, jumping 2.2 from the month prior and marking 10 straight months of increases.
A key driver of the latest gain is Inventory Levels, which were up 4.1 to 59.8 and showed improvement both upstream and downstream - indicating retail supply chains are seeing some peak-level activity during the normal peak season. Authors note there hasn't been such a "typical" peak season since 2021 - or even longer if not accounting for the pandemic's freight impact.
Along with Inventory Levels, Inventory Costs were up 2.3 to 71.3, while Warehousing Prices jumped 3.2 to 66.9. The other warehousing indices saw related activity, as Utilization gained 3.3 to 60.9 and Capacity dropped 3.7 to 55.9, the second lowest of the eight LMI metrics.
Always key to market health are Transportation Prices and Transportation Capacity - which indicate a healthy market with a solid advantage going to the price metric. While Transportation Prices did fall a bit month to month (-3.2) to 58.4, the gap grew as Transportation Capacity fell more, dropping 6.7 to 50 even - indicating no expansion. Transportation Utilization interestingly, also fell a bit, from 59.5 to 57.6.
Overall, things are certainly looking up, but there are still red flags. Inflation is down and salaries are up in the U.S., but inflation is subsiding far more slowly in other locales. And the strike of East Coast and Gulf Coast dockworkers may throw a significant wrench into the economy if it becomes lengthy, particularly hurting just in time inventory practitioners who did not build inventory earlier in the year.
On the path forward, LMI respondents remain optimistic, predicting an LMI reading of 65.4 12 months from now, up 3 from last month's projection. That would put the index above it's all-time average of 61.8, suggesting those in the industry expect growth to continue in the coming year.
By the Numbers
See the summary of the September 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 September 2024.
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