A monthly supply chain survey registered a neutral reading for transportation capability in June, the primary time in greater than two years the index didn’t expand. Sentiment around transportation pricing signaled growth for a second consecutive month.
The Logistics Managers’ Index (LMI) displayed a 50 reading for capability in June. The last nongrowth reading on transportation capability was in March 2022, just ahead of the freight recession’s onset. The capability subindex was 7.3 percentage points lower in June than it was in May.
The LMI, a compilation of eight key components of the availability chain, is a diffusion index wherein a reading above 50 indicates expansion while one below 50 signals contraction.
Transportation pricing (61) was up 3.2 points sequentially and at its highest level since June 2022. The pricing dataset has been in expansion territory for five of the past six months, closing June 14.5 points higher than it was in the primary a part of the month.
The pricing subindex was higher than the capability subindex for a second straight month. This is usually a signal that the freight market is growing.
“If this trend continues — as one might expect with peak season coming — then we can be comfortable calling the top of the freight recession that has gripped the industry for the reason that Spring of 2022,” the Tuesday report said. “The freight recession just isn’t technically over yet, but that is what the start of a recovery might seem like.”
A surge in ocean shipping spot rates is pushing overall transportation pricing sentiment higher.
The transportation utilization subindex (55.7) fell 3.5 points through the month. Upstream firms (like manufacturers and wholesalers) turned in a reading of 59.2 in comparison with downstream firms (like retailers), which returned a 46.2 reading.
The one-year-forward outlook for capability (43.6) calls for contraction while respondents’ expectation for pricing (79.8) was solidly into expansion territory.
“We will not be able to call an end to the freight recession that has gripped the industry for the last two years,” the report said. “Nonetheless, if respondent future predictions are accurate, peak season materializes, and the trends of the last two months hold, it is probably going the freight market will move back right into a cycle of growth.”
![](https://www.freightwaves.com/wp-content/uploads/2024/07/02/tender-rejections-1200x406.jpg)
![](https://www.freightwaves.com/wp-content/uploads/2024/07/02/spot-rates-1200x407.jpg)
The general LMI logged a 55.3 reading for June, barely lower sequentially but in expansion territory for a seventh straight month and for 10 of the past 11 months.
Inventory levels (47.4) increased nearly one point but remained in contraction territory while inventory costs (63.6) continued to expand but at a rate that was 1.6 points lower than in May.
The reading on inventories flipped barely into expansion territory at 51.7 within the second half of the month. Upstream firms were more energetic, logging a reading of 51.5 in comparison with downstream corporations at 37.
Inventory costs were 11 points higher within the second half of the month.
“Downstream firms running inventories down while the Upstream counterparts construct them up likely signals that retailers are trying to take care of [just-in-time] and keep costs down while their Upstream partners begin the buildup needed for peak season,” the report said.
It also said some shippers might be taking inventory early this 12 months to avoid potential peak season congestion, which might be exacerbated by labor negotiations on the East and Gulf Coast ports.
“Whether or not this may lead shippers to maneuver potential orders forward — trading inventory holding costs for assurances against disruption — stays to be seen,” the report concluded.
The subindex for warehousing capability (52.6) was down 3 points sequentially and 11 points lower 12 months over 12 months. Because the inventory metrics accelerated within the back half of June, the warehouse capability dataset declined to 48.3.
Warehouse utilization (52.6) dropped 11.4 points from May and was just off the all-time low. The reading for upstream corporations was 11 points higher than those downstream. Warehouse pricing (64.5) was largely unchanged within the month, with an identical spread between upstream and downstream respondents.
The LMI is a collaboration amongst Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University and the University of Nevada, Reno, conducted along with the Council of Supply Chain Management Professionals.
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