Logistics economy expanded in January

The logistics economy expanded in January as demand for warehousing and transportation services remained high, continuing a strong rate of industry growth that began more than a year ago. That’s according to the latest Logistics Manager’s Index (LMI) report, released this week.

The LMI registered 71.9 in January, up nearly two points from December and marking the 12th straight month of readings above 70, according to LMI researchers. An LMI above 50 indicates expansion; a reading below 50 indicates contraction.

Tight warehousing and transportation capacity and high costs helped fuel inventory levels leading into the new year, resulting in unseasonably high inventory accumulation in January, according to the report. That cycle is predicted to continue, as respondents to the monthly LMI survey said they see no relief from capacity constraints and high prices over the next 12 months.

“Essentially, low capacity and high costs led to higher levels of inventory, and now higher inventory is leading to even less capacity and higher costs,” the LMI researchers reported. “The result of this is that the high levels of inventory of durable goods in the supply chain is eating up capacity and preventing high-turn inventories from moving as quickly as they need to, which explains why some firms (i.e. apparel) are weighed down with inventory, and others such as grocery stores are facing shortages.”

In addition, consumer spending cooled in December, dropping 0.6%, and likely helped drive up inventory levels. But the researchers said the start-stop nature of economic activity during the pandemic will likely continue in 2022, and that supply chain managers’ outlook calls for strong growth overall. The LMI’s Future Predictions Index registered 70.7 in January, well above the all-time average LMI score of 64.8.

The LMI tracks logistics industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).

Visit the LMI website to participate in the monthly survey.