Oct US logistics manager's index 57.4; indicates no movement from Sep

The lack of movement is the result of cross-pressures from downward movements in inventories and warehousing metrics, counteracted by upward pressures in transportation metrics.

The most significant downward movements are inventory levels dipping (minus 5.6) into contraction at 49.5 and a subsequent slowdown in warehousing utilisation (minus 8.8) to a much slower expansionary rate of 56.5.

The upward movements come disproportionately from transportation, with transportation prices (plus 7.5) up to 61.7 and transportation utilisation (plus 7.3) up to 57.3—a marked shift from the reading of 50 and no movement reported in September, an official release said.

The upward swing in transportation prices combined with the slight downtick (minus 0.7) in the expansion of available transportation capacity (54.5) breaks the two-month trend of a negative freight inversion.

Given the very slim margins of last month’s negative inversion (a 0.9-point gap) as well as seasonal factors, it is unsurprising that transportation markets have swung back towards expansion, an official release said.

This is largely due to activity at downstream retailers. Downstream firms reported transportation price expansion of 70 and transportation capacity at 56.1. Conversely, upstream firms reported a significantly milder transportation price expansion of 56.4, and transportation capacity expansion of 53.6.

It seems that retailer expectations of consumer spending over the holiday shopping season, and the subsequent movements of inventories to serve that demand, has halted the previous downward trend that had been observed.

This is similar to the dynamics observed in the Fall of 2018, when upstream business-to-business (B2B) freight slowed down to US tariffs on Chinese imports, but business-to-consumer (B2C) movements remained steady due to strong US consumer activity.

Inventories are likely dropping as holiday sales begin, easing the prior tightness in warehousing and leading to a greater utilisation of transportation due to the increased movement of goods. Essentially, supply chains have gone from being somewhat static and weighted down by inventory, to moving in a more dynamic, seasonally consistent manner, the release observed.

Researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued the LMI report.

ALCHEMPro News Desk (DS)