Logistics industry growth continued in February

Economic activity in the logistics industry expanded in February, but slowed from January, according to the latest Logistics Managers’ Index (LMI) report, released this week.

The February LMI registered 54.7, down nearly three percentage points from January’s reading (57.6) to match December's level (54.6). The LMI measures business activity across warehousing and transportation markets via a monthly survey of logistics managers. An LMI reading above 50 indicates expansion across the industry, and an LMI below 50 indicates contraction.

February’s reading was below the three-month average high of 55.7 and well below the index’s all-time high reading of 64.3. The industry had been experiencing high growth rates between mid 2020 and spring of 2022, when industry conditions began to slow back to more typical levels.

Current conditions reflect continued slowing in transportation, marked by falling transportation prices, elevated capacity, and flat utilization, according to the report.

“The biggest movers in this month’s index are Transportation Costs, which are back down (-5.9) and are now contracting at the fastest rate we have measured in the 6.5-year history of the index,” the LMI researchers wrote in their report, published Tuesday. “There is some evidence that January’s slower rate of contraction was due to weather issues pushing shipments meant for December back a month. February is generally a low point seasonally due to the consumer spending hangover from the holidays in the U.S. combined with slowness in imports due to Chinese New Year, and that was certainly reflected this year. There is optimism from some corners that traffic will pick back up sometime in Q2 as retailers begin to rebuild inventories ahead of back-to-school and holiday shopping, but as of this moment that has yet to materialize.”

The researchers also noted that a long-awaited loosening in warehousing capacity finally materialized in February. After two-and-a-half years of contraction, the LMI’s Warehousing Capacity index grew more than 10 percentage points, putting it in growth mode at a reading of 56.6. That may be a harbinger of lower costs and easing supply chain congestion down the road, the researchers also said.

“... a lack of supply has been the primary driver behind inflation over the last year; this includes the lack of the necessary supply of warehousing,” they wrote. “As warehousing becomes more available, supply chains will become more efficient, and the costs of holding and moving goods will decrease—something that should have a significant impact on inflation.”

It may be some time before those conditions materialize, however, because warehousing prices and inventory costs remain at high levels.

“... with Warehousing Prices (73.3) and Inventory Costs (70.9) still expanding at accelerated rates, it will take a significant and prolonged expansion of Warehousing Capacity to push the market back towards normal cost levels,” according to the report.

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.