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Home/News/Trucking/Logistics/Transportation metrics show early signs of firming
in January
LogisticsNewsTop StoriesTrucking


TRANSPORTATION METRICS SHOW EARLY SIGNS OF FIRMING IN JANUARY


LOGISTICS MANAGERS’ INDEX LOGS 2ND STRAIGHT INCREASE

Todd Maiden
· Tuesday, February 07, 2023
“If 2023 is the return to normal that many in the industry are anticipating, we
would expect to see inventories continue to climb slowly, peaking sometime in
Q3,” report says. (Photo: Jim Allen/FreightWaves)
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A deterioration in transportation metrics slowed in January, according to supply
chain data published Tuesday.

A monthly survey of supply chain executives, the Logistics Managers’ Index
(LMI), showed transportation prices contracted at a slower pace than that of the
all-time fastest rate of decline logged by the data set during December. The
prices subindex registered a reading of 42 in January.

A level below 50 indicates contraction while one above signals expansion.

The January change rate for prices was the closest to break even in three months
and 5.1 percentage points higher than in December. However, the index still sits
near two-year lows.

Transportation utilization was up 8.9 points to 57, the highest level since
September when inventories were being moved from wholesalers to retailers in
advance of the holiday buying season. Transportation capacity (70.2), however,
continued to expand by a healthy clip, remaining near all-time highs.

“The transportation metrics remain down from where they were from late 2020 to
early 2022, but we do see some encouraging signs,” the report said. “There is
still excess transportation capacity in the market, but respondent future
predictions and anecdotal evidence from carriers suggest that increased demand
may begin soaking up some of this excess soon.”








Truckload data from FreightWaves shows the industry has potentially found the
floor. 

Both tender rejections and spot rates remain depressed, following a brief
rebound from the end of December into mid-January. While many carriers are
forecasting a recovery in demand by summer, some have also cautioned that the
recent bounce in freight metrics may have had more to do with the trucking
sector playing catch-up following severe weather at the end of the year.

Chart: (SONAR: OTRI.USA) A proxy for truck capacity, the Outbound Tender Reject
Index, shows the number of loads being rejected by carriers. To learn more about
FreightWaves SONAR, click here. Chart: (SONAR: NTIL.USA). The National Truckload
Index (linehaul only – NTIL) is based on an average of booked spot dry van loads
from 250,000 lanes and 10,000 daily spot market transactions. The NTIL is a
seven-day moving average of linehaul spot rates excluding fuel.

The overall LMI logged in at 57.6 in January, three points higher than in
December. This was the second straight increase for the index after falling
seven of eight months.

“Inventories are much lower now than they were in Q3 of last year, and it seems
the supply chains are coming back to life with the goal of replenishment,” the
report said.

Inventory levels (62.5) expanded again in the month, up 5.2 points sequentially.
However, the reading was 8.6 points lower year over year and in line with the
level recorded in January 2021.

“This means that seasonally speaking, inventories may be getting ‘back to
normal’ following the runaway growth we saw in 2022 [as] firms were finally able
to run down inventories over the holiday season.”



Inventory costs (74.2) continued to expand, but the index has settled into a
less inflationary band, down 13.7 points from a year ago. However, inventory
costs have grown at a reading of 70 or higher for 28 consecutive months.
Inflated warehouse rents and higher interest rates have pushed the costs
associated with holding merchandise higher.

“If 2023 is the return to normal that many in the industry are anticipating, we
would expect to see inventories continue to climb slowly, peaking sometime in
Q3.”

Warehousing capacity (46.4) contracted for the 30th straight month, “the longest
run of contraction that we have observed for any of our metrics during the 6.5
years of the LMI.”

The capacity reading crossed into expansion territory at 51.5 in the back half
of the month, up more than 10 points when compared to the first two weeks of
January.

“It will be interesting to observe whether this is a sign of capacity finally
loosening up in the warehousing sector or if this is merely a momentary few
weeks of calm before firms begin to rebuild their inventories for 2023.”

Warehouse utilization (67.1) and prices (75) remained firmly in growth mode.



The forward-looking expectation for warehouse utilization was more than 14
points higher for upstream wholesalers during the month when compared to
downstream retailers, possibly signaling “manufacturers are optimistic about the
potential for future orders/sales, particularly as transportation prices come
down.”

Upstream firms also had a higher expectation for future warehouse prices (77.1),
12 points higher than retailers.

In fact, upstream firms expected more significant rates of expansion in seven of
the index’s eight components, “lending credence to the idea that the economy is
generating some forward momentum.”

The LMI is a collaboration among Arizona State University, Colorado State
University, Rochester Institute of Technology, Rutgers University and the
University of Nevada, Reno, conducted in conjunction with the Council of Supply
Chain Management Professionals.

More FreightWaves articles by Todd Maiden

 * Flatbed carrier Daseke sees industry hitting new peak for rates in 2025
 * Recent acquisitions weigh on Heartland Express’ Q4
 * ArcBest’s Q4 light of analysts’ expectations


A LOOK AT LANDSTAR AND CH ROBINSON

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TODD MAIDEN

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to
joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC
Capital Markets and BB&T Capital Markets. Todd began his career in banking and
finance before moving over to transportation equity research where he provided
stock recommendations for publicly traded transportation companies.
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