Economic activity in the logistics industry slowed in March, driven by continued sluggishness in freight markets, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The March LMI reached an all-time index low of 51.1, down nearly four points from February and just slightly above the 50-point mark indicating economic expansion in the industry. An LMI reading above 50 indicates growth; a reading below 50 indicates contraction.
Logistics managers responding to the monthly LMI survey reported an all-time low in transportation prices, with that index falling five points to a reading of 31.1. At the same time, the transportation utilization index registered 50, indicating no upward movement for the first time in 2023. Transportation capacity continued to expand, indicating a continued softening of demand for services.
The LMI researchers summed up the freight challenges by noting that: “The freight recession that has been discussed over the last few months seems to have reared its head in March.” They pointed to recent industry consolidation and slowing volume among the major parcel carriers as key factors, as well as slowing conditions in ocean freight.
“The drying up of transportation demand extends to the oceans, where carriers are struggling to fill the capacity they built up over the last few years,” the researchers wrote. “With many of the contracts that were in place now expiring, importers are choosing between locking in low rates or taking advantage of the very favorable spot market. This softening is reflected in the continued expansion of available [transportation capacity] which is up [one point] to 71.4, the fourth highest reading for this metric in the history of the index.”
The slower conditions come amid a mixed overall economy that some business leaders say may be heading toward recession in the second half of the year.
“This is the slowest rate of [industry] growth we have ever tracked in the 6.5 years of the index, but it is still growth,” the researchers wrote in the March report. “Things have clearly been slowing down, but the macro economy has not yet come to a halt.”
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.
Victoria Kickham, an editor at large for Supply Chain Quarterly, started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for Supply Chain Quarterly's sister publication, DC Velocity.