Transportation prices fell again in July but at a slower rate than in the prior two months, according to data compiled in the Logistics Managers’ Index (LMI).
Prices registered a 35.6 reading during the month, well below a neutral level of 50, but the falloff wasn’t as sharp as the record rate of decline set in May (27.9). The Tuesday report showed the growth rates for transportation capacity (65.6) and capacity utilization (41.8) slowed by mid-single-digits from June.
The subindex for prices jumped 11.5 points from the first half to the last half of July. Survey responses around utilization saw a similar move.
“This early/late month shift is similar to what we saw in March of 2022 when the freight recession began,” the report said. “A lot would need to happen for transportation markets to recover, but this type of significant movement in transportation metrics would be the first step on that path.”
However, downstream firms like retailers see transportation capacity continuing to surge. The group returned a one-year-forward prediction of 73.5 for capacity, while upstream respondents like wholesalers had a neutral take on next summer.
Inventory levels (41.9) declined at the fastest pace in the six-and-a-half-year history of the index. Downstream firms reported modest inventory growth (51.4) versus wholesalers (37.5), which saw a decline in stock levels.
The report said some companies may not be restocking yet as they ordered too much in the past and found themselves in an overstocked position last year. Further, there may be the belief that transportation capacity will be available for rush orders.
The report also said some companies are going back to just-in-time inventory strategies, which “could be particularly true for firms who are still locked into higher storage costs [warehouse leases].”
Declines in inventories showed up in warehousing metrics, which have cooled.
Warehousing capacity (64.4) grew at the highest rate in the data set’s history in July. Warehouse utilization (52.5) expanded but at a slower pace, and warehousing prices (60.6) continue to increase but the rate of increase has trended lower for more than a year now.
The lowest reading for warehouse prices in the index’s history is 59.
The industry is down 41,000 warehouse workers over the past 13 months, the report said. “With ecommerce stabilized at around 15% of retail, it is more likely that the warehousing market is reaching an equilibrium after three years of wild swings,” the report said.
The overall reading for the supply chain activity index was 45.4, a third straight month of contraction territory and a new low for the index.
The LMI is a collaboration among Arizona State University, Colorado State University, Florida Atlantic, Rutgers University and the University of Nevada, Reno, conducted in conjunction with the Council of Supply Chain Management Professionals.
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