Logistics Managers’ Gauge Rises for First Time Since March

"Warehouse is chugging along." (Getty Images)

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Supply chain activity in the U.S. picked up for the first time since March, buoyed by elevated inventories even as transportation costs slid for a sixth straight month.

The Logistics Managers’ Index increased to 61.4 in September from 59.7 a month earlier, the report posted online Oct. 4 showed. Fifty is the dividing line between expansion and contraction, and it has been hovering above 70 for much of the past two years as the pandemic threw supply and demand out of balance.

“Transportation continues its slump, while warehousing is chugging along at the same breakneck pace we have observed for much of this post-pandemic recovery period,” the report said. “Much of this confusion can be attributed to the high levels of inventory that continue to permeate global supply chains.”

Subcomponents of the index — measuring utilization, capacity and costs for transportation, warehousing and inventories — are going in various directions:

• Transportation: Capacity rose to a reading of 71.8, marking a nearly 50-point reversal from the days of tight shipping-space availability two years ago. But prices stayed below 50 for a third straight month, “providing more evidence to the new reality carriers are observing as some market power shifts back toward shippers.”
• Inventories: Levels and costs gained. “Higher-than-usual inventory growth may reflect earlier-than-usual efforts to be prepared for the holiday season, in case of production or shipping delays,” the report said.
• Warehousing: Capacity stayed below 50 and utilization jumped — a combination that bodes ill for companies hoping warehousing costs will ease anytime soon from high levels. “Even if some warehousing space comes on line, respondents are pessimistic that it will be enough to take significant pressure off of price growth.”