FORT COLLINS, Colo. – The health of the logistics industry may finally be improving according to the Logistics Managers Index, with August putting an end to the five consecutive previous all-time monthly lows. The index came in at 51.2, nearly six points ahead of July’s, 45.4. Any reading above 50 indicates expansion.
Transportation prices, a key metric in the index, fell again, but at a slower pace than July. Transportation prices for retailers are higher than they are for suppliers but are declining for both. “If the current trends continue, it is possible that we will see price growth on the downstream side (retailers) soon, which would be the first such instance in over a year,” the report said.
Warehousing prices are growing but slowly. They’re still down significantly from a year ago. Larger firms are reporting greater increases.
Inventory levels are still contracting for both suppliers and retailers. Larger firms, though, are restocking much faster than smaller ones (55.5 vs. 42.9, respectively).
When asked to predict inventory conditions will be like 12 months from now, the average value was 54.3, up (+6.4) from July’s future prediction of 47.9. Upstream respondents predicted an increase of 57.6, while downstream respondents predicted a slight increase of 48.9.
This suggests that while retailers are expecting inventory to stay close to a steady state, their suppliers are expecting them to pick up.
Inventory costs were way up for the month (+8.6), which the index attributed to a lack of storage capacity and a restocking of inventories from large firms.
“While it is likely we will see inventories begin to grow again ahead of Q4, it is unlikely they will get anywhere close to what we saw in the buildup to the holiday season in 2020 and 2021,” the report read.
Warehousing capacity continues to grow rapidly. This growing capacity is being spurred by U.S. chip and battery production demand according to the report, as well as a growing push for e-commerce retailers to accommodate same- and next-day delivery.