Logistics industry growth slowed in October

According to the monthly Logistics Manager’s Index (LMI) report released today, economic activity in the logistics industry slowed in October, continuing a moderate growth trend that started earlier in the year.

The LMI recorded 57.5, the lowest since May 2020, when the peak of the pandemic ushered in an era of exceptionally strong growth in demand for logistics services. Although the monthly index is slowing, it still points to an expansion in the industry as an LMI reading above 50 indicates growth and an LMI below 50 indicates a contraction in the logistics markets. The LMI had remained in the upper 60s and 70s throughout the pandemic, falling to the low 60s and high 50s over the past four months.

The change continues to be driven by a slowdown in transportation markets and an overabundance of inventories that are driving up costs.

“Overall, the LMI is down -3.9 from the September reading of 61.4,” the LMI researchers wrote in their monthly report. “As in September, transportation metrics continue to weigh on the logistics industry while inventories remain high, warehouses full and both expensive.”

The transport capacity index rose by 1.3 points compared to September to a value of 73.1; This is the highest such reading in the index’s history, beating the 2019 freight recession and marking a new low in the transportation downturn, the researchers wrote. Transportation prices fell for the seventh straight month, down more than two points since September to a reading of 42.2.

“This is the lowest reading for this metric since April 2020, suggesting that transportation prices fell so rapidly the last time the world was essentially at a standstill,” the researchers wrote.

Inventories grew in October, but at a slower pace than in previous months. At 65.5, the inventory index was more than six points below September, marking the slowest growth rate since December 2021. Storage capacity continued to shrink but remained at September’s level at 44.7. Both inventory costs and warehousing prices rose to 80.9 and 75.5 respectively in October – numbers that represent a sizeable expansion in both areas and indicate high costs for both inventories and warehousing across the supply chain.

But the slower pace of inventory growth suggests companies are doing a good job of exiting the inventory bubble that has been in place for much of this year, according to LMI researcher Zac Rogers, an assistant professor of supply chain management at Colorado State University. But Rogers said it will be until early 2023 to see how much progress has been made.

“It’s encouraging that we’ve come down to the slowest rate of [inventory] Growth,” Rogers said in an interview on Tuesday. “We are in a better place than ever. It’s progress – I would say so.”

The LMI report is based on a monthly survey of North American logistics industry professionals. It tracks the growth of the logistics industry overall and in eight areas: inventories and costs; storage capacity, utilization and prices; as well as transport capacity, utilization and prices. The report is published monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada, Reno, in collaboration with the Council of Supply Chain Management Professionals (CSCMP).

Information on how to take the monthly survey is available on the LMI website. Information on how to take the monthly survey is available on the LMI website.

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