Transportation market weakened as September progressed
Transportation capacity increased for a sixth consecutive month in September with prices falling for a third straight time.
The Logistics Managers’ Index (LMI), which is produced using responses from a monthly survey measuring supply chain activity, showed the transportation capacity subindex jumped 7.5 percentage points to 71.8 in the recent month. This was the second-highest level recorded in the six-year history of the data set and 48 points higher than the mark recorded two years ago when the economy was emerging from COVID lockdowns.
The LMI data showed a notable deterioration in respondents’ sentiment in the back half of September. Survey responses for the overall LMI were 7.4 points weaker in the back half of the month compared to the first 15 days. The changes were notable in transportation metrics — capacity (9.2 points higher) and prices (14 points weaker) — which highlighted further loosening in the market at the month progressed. Inventory levels, however, fell 9.5 points in the last two weeks of September. The transportation prices subindex was just 36.8 in the back half of September, appearing to reach a fork in the road.
“This rapid change may be attributable to the beginnings of a sharp slowdown (potentially brought on by interest rates and inflation destroying demand), or conversely could be a wave of calm before increased activity we may see during Q4,” the report stated. “At this point is it impossible to tell for certain, but what is clear is that the rate of growth in the logistics industry slowed drastically in late September — a time when things would be picking up in normal times.”
The report noted many shippers pulled forward ocean shipping delivery windows this year to avoid the supply chain snarls that were prevalent last year. This was evident in recent inbound container metrics at the nation’s 10 largest ports. Loaded twenty-foot equivalent units were flat year over year (y/y) in August, but that was the fifth-busiest month all time for container imports. Facing elevated comps from a year ago, inbound TEUs were up 1.5% y/y in the three- month period ended in August.
This likely means warehouses have the inventory needed for the holiday buying season already in place, which could support truck demand in the fourth quarter assuming higher interest rates and inflation don’t curb consumer spending.
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