The most recent Logistics Managers’ Index Report had good news to share, pointing to a positive sign for the logistics industry. The results of the survey show the industry is growing for the first time since September 2019, largely due to a number of factors, including increased inventory levels, transportation prices, and warehousing capacity. In fact, each of the eight metrics that the Index measures are expanding, putting the current LMI score at 55.6. It’s predicted that over the next 12 months, the rate of expansion will be 62.8. Overall, it’s expected that the industry will continue to grow in 2024, but that the growth rate will be slower than what it was in 2021 and 2022. The war in Ukraine and the slowdown in China are factors.
Our take: Companies should consider that freight prices are likely to have bottomed and be on the lookout for rates to begin rising. Working with your freight forward to ensure your rates remain market-appropriate through the rest of 2024 should be a priority.
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To balance things out, despite the positive news mentioned above, the New York Fed recently reported that supply chain pressures rose in January, although they’re still significantly below the levels seen in late 2021. However, they also haven’t escalated yet due to the disruptions in the Middle East. This is helping to keep the Fed’s Global Supply Chain Pressure Index down despite its rise to -0.11 in January from -0.15 in December — negative numbers indicate below-normal pressure. For the sake of comparison, in December 2021, the Index peaked at 4.33, during the height of the disruptions brought on by the pandemic. So far, fallout from the Red Sea crisis, specifically concerns about higher shipping costs and the potential for increased pressure on inflation, has impacted Europe more significantly than the US.
Our take: With the Red Sea and Panama Canal still facing service disruptions, supply chain risk is still a concern for every global shipper. Companies should remain diligent and flexible, knowing neither issue is likely to be resolved soon.
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Trade experts, shippers, and retailers shared grim warnings with Congress in January with regards to the impact of Houthi attacks on shipping in the Red Sea and the potential consequences for the global economy. The group feels that the attacks — which have pushed shipping companies to divert routes, leading to delays and rising freight costs — will lead to another bout of inflation since those costs will be passed on to the consumer. Some companies are already using air freight, which is much more expensive. Overall, the group feels that these attacks have and will continue to impact global trade and they’re pushing for the US to take action and address the situation. However, it’s important to add that not everyone shares their opinion since the market is still oversupplied.
Our take: The takeaway is that the impact of the Red Sea conflict is very different for every company. Headlines do explain what’s happening with your freight. Talk to your forwarder to understand how your shipments are being impacted in terms of cost and transit time… then adjust accordingly where needed.
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