June 2024 Logistics Manager’s Index Report® LMI® at 55.3

Posted on Jul 3, 2024 in Nuts & Bolts

Growth is INCREASING AT AN INCREASING RATE for: Transportation Prices.

Growth is INCREASING AT A DECREASING RATE for: Inventory Costs, Warehousing Capacity, Warehousing Utilization, Warehousing Prices, and Transportation Utilization.

NO CHANGE for: Transportation Capacity

Inventory Levels are CONTRACTING.

The Logistics Manager’s Index reads in at 55.3 in June of 2024, this is very slightly down (-0.3) from May’s reading of 55.6. The overall index has expanded for seven consecutive months and in 10 of the last 11 months. While the overall index has not changed significantly this month, there has been considerable movement in some of the individual metrics. Inventory Levels (+0.8) contracted for the second month in a row at a rate of 47.4. With inventories down we also saw associated dips in the expansion rate of Inventory Costs (down 1.6 points to 63.6) and a very notable drop in Warehousing Utilization (down 11.4 points to 52.6). This slow down is counteracted by a tightening of both Warehousing Capacity (-3.0) at 52.6 and Transportation Capacity (-7.3) which read in at 50.0 – the first time this metric has moved out of expansion since March of 2022 which was the last month before the freight downturn began in earnest. We also see a related increase (+3.2) in Transportation Prices, which at 61.0 are at their highest level since September of 2022. At an 11.0-point difference, Transportation Prices have not exceeded Transportation Capacity by this much since April of 2022. This marks the second consecutive month that prices have exceeded capacity, and Transportation Capacity has moved out of expansion and to “no change” at 50.0. If this trend continues – as one might expect with peak season coming – then we would be comfortable calling the end of the freight recession that has gripped the industry since the Spring of 2022. The freight recession is not technically over yet, but this is the is what the beginning of a recovery might look like.

As will be discussed below, much of this expansion can be attributed to strong reports from Upstream respondents, as well as stronger readings in the second half of the month.

Researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued this report today.

Results Overview

The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50.0 indicates that logistics is expanding; a reading below 50.0 is indicative of a shrinking logistics industry. The latest results of the LMI summarize the responses of supply chain professionals collected in June 2024.

The LMI read in at 55.3 in June, down slightly (-0.3) from May’s reading of 55.6 and indicating a moderate rate of expansion in the overall index. This marks the tenth of eleven readings, and seventh consecutive reading of expansion in the overall index. As mentioned above, this increase was largely a function of positive movements in the transportation market contrasting with a moderate contraction in inventories and slowing rates of expansion in the warehousing market – particularly Warehousing Utilization which is down 11.4 points. Most of the growth came in the second half of the month however, particularly from Inventory Levels, which moved from contraction to expansion as June went on.

The overall economy continues to be fairly nuanced, but has consistently pointed towards moderate growth, with some hope that interest rates may be revised down. The World Bank is optimistic that strong growth will continue throughout the year, revising their estimates for global GDP expansion up from 2.4% to 2.6% – largely on the strength of the U.S. economy which has led the world in the post-Covid period[1]. GDP growth for Q1 of 2024 was revised up to 1.4% in the last week of June. While this is up from the previous estimate of 1.3% growth, it is the slowest rate of expansion since the Spring of 2022. One of the primary factors in this contraction was a drawdown of inventories in Q1 – something that was reported through the LMI reports during that time[2]. The fact that inventories remained low through Q2, particularly in May and June when they contracted slightly, could foreshadow a slow rate of overall economic expansion in this most recent quarter as well. It is interesting that inventories were down when personal consumption expenditures (PCE) were up 2.6% from a year ago – the lowest rate for the PCE in three years and closing in on the Fed’s stated goal of 2%. However, when digging into the details we see that, while personal income was up 0.5%, spending was down 0.2% in May. The decline in spending was headlined by a 0.4% decrease in spending on goods[3] – something that may be reflected in contracting inventory numbers.

Firms may be more willing to invest in inventories – particularly upstream – when interest rates come down. New weekly jobless claims in the U.S. were down to 238,000 in mid-June – down 5,000 from the week before. Conversely, continuing unemployment claims increased by 15,000 to 1.828 million which is the highest level since 2021. More broadly, the U.S. unemployment rate reached 4.0% in May – a level it has not seen since January of 2022. Economists believe that these are signs that the job market is softening and are hopeful they will result in the Fed cutting interest rates 1-2 times by the end of 2024[4]. The European Central Bank recently cut their interest rates to 3.75%. Observing the impact those cuts have on economic activity in the EU will be informative for the Fed in the U.S.

Inventory Levels contracted very slightly at 47.4, which is slower than what we saw last month (+0.8). Interestingly, they contracted in the first half of the month (40.5) before turning around into expansion (51.7) at the end of June. This was largely driven by Upstream firms who slightly increased Inventory Levels at 51.5, a sharp contrast to Downstream firms who saw inventories contract at 37.0. Downstream firms running inventories down while the Upstream counterparts build them up likely signals that retailers are attempting to maintain JIT and keep costs down while their Upstream partners begin the build up needed for peak season. The Netherlands Bureau of Economic Policy estimates that global industrial and manufacturing output was up by 1.6% from February to April. That has in turn led to an increase in freight volumes, with U.S. container ports processing over a million additional TEUs year-over-year through the first four months of 2024[5]. US orders for manufactured durable goods increased 0.1% in May to $283.1 billion, partially explaining the mild growth in Upstream inventories. Interestingly, the largest factor contributor to this increase was Transportation equipment, which was up 0.6% to $95.4 billion[6]. There is evidence that at least part of the increased demand for international shipping is due to “pre-stocking”. Shippers who were scarred by delays during Covid and are worried about the possibility of high spot rates later in the year seem to be bringing inventories in early[7]. This could have the effect of smoothing out transportation and side-stepping the congestion that often defines peak-season. This could also help to avoid a sudden spike in Inventory Costs where the rate of growth was down slightly (-1.6), but still solidly in expansion territory at 63.6. Like Inventory Levels, this was higher in the second half of June (moving from 56.9 to 67.9).

Pre-stocking may partially explain the over 210,000 TEUs that are scheduled to arrive at the Port of Los Angeles in the first half of July[8]  which is an increase of 11% year-over-year. There could continue to be pressure on the west coast ports as East and Gulf Coast dockworkers pulled out of planned negotiations in protest against the planned implementation of increased automation at ports. The association includes 45,000 workers and their contract is set to expire on September 30th – meaning a strike could happen at the height of peak season[9]. Whether or not this will lead shippers to move potential orders forward – trading inventory holding costs for assurances against disruption – remains to be seen. It is not all bad news on the strike front however, as the union representing 9,000 border agents in Canada have come to a tentative agreement on a contract that will allow the $2.6 billion of goods per day to continue flowing between the U.S. and Canada[10].

It should also be noted that an increasing level of inventory is coming into the U.S. via air shipment. Glyn Hughes, the director of The International Air Cargo Association, stated that transpacific volumes are up by 60-70%, much of which is driven by air-shipped e-commerce. This is a significant shift from the 3.5-4.5% growth carriers had been projecting coming into 2024[11]. The glut of air-shipped ecommerce coming from China to North America has led air freight carriers to significantly increase transpacific capacity. Etihad Cargo exemplifies this, as they plan to add an additional 250 tons, which would increase their existing capacity by 50% (Lennane, 2024). Transpacific air shipments will only get busier, as Amazon announced a plan to implement air shipping to move products directly from China to U.S. consumers in 9-11 days. This will increase services levels and transportation expenditures but could also curb the need for warehousing.

Reducing the need for warehousing could be helpful as we move into peak season. The growth rate for Warehousing Capacity slowed (-3.0) to 52.6 which is 10.9 points lower than the same reading from a year ago, and it contracted in the second half of the month (dropping from 59.2 to 48.3), both of which lend some credence to the pre-stocking theory. Continuing the trend discussed last month, there has been activity in adding warehousing for both last-mile and middle-mile delivery. An example of the latter can be seen in Kuehne+Nagel recently adding more traditional cross-dock warehouses for the purposes of quickly moving temperature-controlled goods away from ports and towards their final destinations[12].

Warehousing Utilization was down significantly (-11.4), only expanding at the marginal rate of 52.6. This is very close to this metric’s all-time low of 52.5 that was recorded in July of last year. Similar to what we saw with Inventory Levels, Warehousing Utilization rates vary significantly depending on supply chain position. Downstream firms actually reported contraction (44.4), which is something we have never seen for this metric. Upstream firms kept the overall reading out of contraction however, reporting steady expansion at 55.7.  The split was similar for Warehousing Prices, although in this case both Upstream and Downstream respondents reported growth at 67.1 and 56.5 respectively. At the aggregate level, Warehousing Prices continued to grow at a slightly slower (-0.4) rate of 64.5.

While there have been some slight slowdowns, the U.S. warehousing market continues to demonstrate signs of health. This stands in contrast to the world’s second largest economy as Chinese warehousing occupancy rates are nearing 20% in the north and east parts of the country. Chinese exports continue to struggle, meaning that there is not enough volume to fill up the large coastal warehouses designed to facilitate exports[13]. This creates a negative feedback loop in which the $100 billion investment in under-utilized coastal warehouses puts increasing pressure on the Chinese real estate industry, which in turn decrease domestic demand and investment. China’s warehousing sector is highly dependent on exports to the U.S. With the specter of investment restrictions in China implemented by the Biden administration, along with former President’s Trump’s proposal to levy a 10% tariff on several imports (and up to 60% levies on certain Chinese goods), China and the EU have agreed to enter into talks with the goal to reduce tariffs. Much like tensions between the U.S. and China, electric vehicles are a key concern in negotiations, as China looks to dodge the 38% tariff that has been proposed by the EU[14]. Conversely, the India is projected to increase available warehousing by 12.5% annually as more manufacturing continues to move there[15].

Perhaps the most interesting movements in June’s index came from our transportation metrics. While the size of the moves were not the most significant, the trends that are being established – particularly for Transportation Capacity and Transportation Prices suggest that a change could be in the air. Transportation Capacity dropped (-7.3) to 50.0, marking the first time that capacity has not been in expansion since March of 2022. This is due to two factors: 1) Contraction of capacity, exemplified by occurrences like U.S. Logistics Solutions shuttering at the end of June, laying off approximately 2,000 logistics employees[16]. While this came as a surprise to many at the company, it does follow the trend of capacity exiting the market as freight moves back towards equilibrium.
2) Pre-stocking and some geopolitical issues leading to increasing demand for multiple modes of transportation.

Starting with ocean shipping, delays in the Red Sea along with a push towards early peak season has led to a spike in demand for ocean containers. According to Alphaliner, only 0.7% of all available commercial tonnage is currently idle – a level similar to early 2022[17]  when global supply chains were flush with inventory. Ocean shipping spot rates are now significantly higher than contract rates that reflect a pre-Red Sea crisis environment. Spot rates are still significantly lower than they were during Covid, but the split between spot and contract rates creates complications for smaller firms who do not have significant contract volumes in place heading into peak season[18]. The sudden increase in ocean freight can be observed in Maersk increasing guidance for the second time in the last few months – now expecting to earn $7-$9 billion as opposed to their earlier forecast of $4-$6 billion. This increase is largely due to carriers rounding the horn of Africa on Asia-Europe routes, which has effectively reduced available capacity by 15-20%[19]. The average cost of shipping containers moving from China to Europe is $7,000 in late June – up from only $1,200 last October. Similarly, Shanghai to California is $6,700 per 40-foot container[20]. There is no indication that costs will be anywhere near the $15,000-$25,000 experienced during Covid, but they are likely to increase further as we move into peak season.

A byproduct of the slower shipping times is increased congestion at major ports – with idle ships building up in Asia and containers accumulating in Europe. This is epitomized at the port of Singapore, where total time in port is approximately 40 days, up 15% from mid-April (Berger & Paris, 2024). The increased activity at ports has led to an increase in intermodal activity. Rail traffic was up in the last week of June as 485,577 carloads and intermodal units were moved – representing an increase of 3.6% year-over-year. This increase was led primarily by increased movements in chemicals and agricultural products. Through the first half of 2024, overall rail volume is up 2.2% in the U.S, and up a significant 6.9% in Mexico[21]. The latter increase may be reflective of the trend towards near shoring in supply chains (and possibly also Chinese imports routing through Mexico to avoid tariffs).

More activity at the west coast ports has also led to an imbalance in fleet deployments. FreightWaves reported that tender rejection rates for dry vans have surged in the Southeastern U.S. Rejection rates are above 7.5% for the first time in nearly two years – more than doubling last summer’s high of a 3.5% rejection rate. Friend of the index Zach (“Zach-1”) Strickland speculates that the lack of capacity in the Southeast may be due to unbalanced fleets that are focused on moving back and forth between the Southern California ports and cargo destinations in the Midwest and Northeast[22].

Transportation Utilization expanded at 55.7, though at a slightly slower (-3.5) rate than May. As one might expect given the changes in Inventory Levels, Upstream firms reported a steady expansion  of 59.2 in Transportation Utilization, while Downstream firms reported contraction at 46.2. There is significant anecdotal evidence that carriers are getting busier. In the last week of June FedEx reported higher than expected earnings and revenue. CCO Brie Carere attributed this to continued growth in ecommerce, which she believes will “outpace” growth in their B2B business[23]. One potential sign of optimism is the increasing number of private carriers and LSPs that are beginning to consider IPOs – something that had largely fallen by the wayside over the last two years when volumes were down[24]. Carriers like XPO, Saia, and Estes have all reported year-over-year growth in volume (particularly Saia whose shipments are up double-digits from a year ago)[25].

Transportation Prices were up (+3.2) to 61.0 in June, which is their highest level since June 2022 two years ago. Some of this is function of increased demand, but some of it is also mechanical. The American Transportation Research Institute (ATRI) reported the marginal costs of operating a truck was $2.270 per mile in 2023, which is up 0.8% from 2022[26]. Additionally, U.S. diesel was $3.769 per gallon in the last week of June, up slightly from earlier in the month but still down $0.032 per gallon from the same time a year ago[27].

In the eight-year history of the LMI we have generally seen that when Transportation Capacity (blue line) exceeds Transportation Prices (orange line), that the freight market falls into recession. Conversely, in the periods when prices exceed capacity we have seen growth. By our calculation, the freight recession officially began in May of 2022 when the Transportation Capacity (blue line) and Transportation Price (orange line) curves inverted. Since that time, available Transportation Capacity has consistently expanded while Transportation Prices contracted in every month from August 2022 to December 2023. This began to change in 2024, though not in a consistent pattern. In three of the first six months (February, March, and April) of 2024, Transportation Capacity was higher than Transportation Prices. In the other three months (January, May, and June) this was reversed, and prices expanded more quickly. This back-and-forth movement is indicative of the slow, uneven recovery of the freight market. Transportation Prices have now expanded more quickly than Transportation Capacity for two consecutive months – the first time this has happened since Q1 2022. Also, in June 2024 Transportation Prices reached their fastest rate of growth since June 2022, and Transportation Capacity did not expand for the first time since March 2022. We are not ready to call an end to the freight recession that has gripped the industry for the last two years. However, if respondent future predictions are accurate, peak season materializes, and the trends of the last two months hold, it is likely the freight market will move back into a cycle of growth.

Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now. Respondents continue to be largely optimistic about the future of the logistics industry, predicting an overall growth rate of 66.1, this is up very slightly (+0.6) from May’s future prediction of 65.5 and is the highest future prediction we have seen in more than two years. The optimism in the overall index is driven by expectations for substantial growth in Inventory Levels (69.5) that will then lead to significant growth rates in the 70’s for Inventory Costs (75.5), Transportation Utilization (70.0) and Transportation Costs (79.8). Consistent with the latter two readings, Transportation Capacity is expected to contract at a rate of 43.6, suggesting that the glut of excess freight capacity that have plagued markets for two years will come back into equilibrium in the next 12 months. Warehousing – the steady drum beat of the logistics industry – is expected to continue expanding at slightly less robust, but potentially steadier, rates. A year that looks like the future currently being forecast by respondents would suggest strong movements in the logistics industry and in the overall economy.

In June we saw several key differences in the feedback from Upstream (blue bars) and Downstream (orange bars) respondents. Moving back to the trend we saw earlier in the year, Upstream firms increased Inventory Levels at a significantly greater pace (51.5) than their Downstream counterparts (37.0) who reported a sizable contraction in inventories. This does not however suggest that activity is slowing Downstream. Rather, it seems more likely based on their contraction in available Warehousing Capacity and Transportation Capacity (48.1 and 46.2 to Upstream’s 54.3 and 51.4) that Downstream firms are focused more on high-turnover inventory management strategies. This does not seem to be the case for Upstream firms as they reported higher levels of utilization for both warehousing (55.7 to 44.4) and transportation (59.2 to 46.2) as well as marginally higher Warehousing Prices (67.1 to 56.5). Taken together, this suggests that Downstream firms are staying lean but utilizing logistics capacity, while Upstream firms build up inventories in anticipation of peak season.

Future expectations mirror the current situation, with greater expectations for future activity from our Upstream respondents (green bars) than from their Downstream counterparts (purple bars). Upstream firms anticipate a significantly higher rate of expansion in the overall index (69.1 to 60.4). Both groups are expecting Inventory Levels to increase, but Upstream firms anticipate that they will grow at a significantly faster pace (74.3 to 57.4), with a corresponding difference in Inventory Costs (78.5 to 68.5). As would be expected with significant inventory growth, Upstream respondents also expect significantly tighter Transportation Capacity (39.7 to 53.4); and while it is not significant, they anticipate a 9.0-point difference in Transportation Utilization (72.5 to 63.5) as well.

As has been the case for the last four months, in June May we saw significant differences between responses from early (gold bars) and late (green bars) in the month. In the mirror image of the downward trends we saw in March and May, June mirrored April in that activity seemed to pick up at the end of the month. As is often the case, this shift was spurred by Inventory Levels moving from contraction (40.5) to expansion (51.7). The increase in goods moving through the system led to significant increases in Inventory Costs (56.9 to 67.9), Transportation Prices (52.4 to 66.9), and in the overall index (50.7 to 59.1). This increased activity seemingly led to a tightening of available capacity as well, with both Warehousing and Transportation Capacity moving from expansion to contraction (59.2 to 48.3 for Warehousing, and 55.1 to 46.4 for Transportation Capacity). The oscillations we have seen between months are consistent with the overall index as we seem to be trending towards expansion, but not in the linear fashion that many in the industry would prefer.

Unlike the contrasts discussed above, we do not find any statistically significant differences between larger firms (those with 1,000 employees or more, represented by gold lines) and smaller firms (those with 0-999 employees, represented by maroon lines). However, we do see some directional differences as smaller firms report no change (50.0) for Warehousing Utilization and very close to no change (50.9) in available Warehousing Capacity; both of which are in contrast to the readings of 56.3 and 57.3 from larger firms with access to greater storage capacity. Larger firms also report mild contraction (46.3) to smaller firms’ mild expansion (52.8) in Transportation Capacity. While the freight market displays similar dynamics for all types of firms, the larger ones seem to be having more difficulty finding the capacity they need. This could be due to market differences, or simply the need for larger firms to move greater volumes.

The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. The rate of expansion for the overall index is down very slightly (-0.3) to 55.3. This comes from a mix of contracting Inventory Levels (+0.8) that have led to slowing warehousing metrics, particularly Warehousing Utilization which is down (-11.4) to 52.6. Conversely, transportation metrics continue their recovery with Transportation Capacity down (-7.3) to “no change” and Transportation Prices up (+3.2) to 61.0 – their first reading in the 60’s in more than two years.

Historic Logistics Managers’ Index Scores

This period’s along with prior readings from the last two years of the LMI are presented table below:

LMI^®

The overall index reads in at 55.3, down very slightly (-0.3) from May’s reading of 55.6. In the mirror image of May, we saw significantly faster rates of expansion in the second half of the month (59.1) relative to the more subdued growth earlier in June (50.7). The average rate of growth for the overall index in Q2 was 54.6, which was down from the average of 56.8 in Q1. This slower rate of growth has mainly been a function of contracting Inventory Levels during the last two months. However, Q2 has also seen generally stronger readings in transportation metrics. That transportation is still expanding despite lower inventories suggests two primary things: 1) Some excess capacity has exited the market, bringing supply and demand closer to equilibrium. 2) Retailers continue to engage in JIT inventory management policies, keeping overall inventories low but increasing rates of turnover. It will be interesting to see what the impact of the increased inventories that come with peak season will be. This may already be on the way based on the higher levels of activity in the overall index readings reported Upstream (57.3) which are significantly higher than the more moderate expansion (51.3) reported by their Downstream counterparts.

When asked to predict what conditions will be over the next 12 months respondents foresee a rate of expansion of 66.1, up slightly (+0.6) from May’s future prediction of 65.5. For the second consecutive month, respondents have returned the most optimistic outlook in over two years. The logistics industry is not all the way back to a boom, but based on these predictions respondents seem to be optimistic. Once again, Upstream respondents have greater optimism, predicting an expansion of 69.1 which is significantly higher than the (still robust) 60.4 predicted by their Downstream counterparts.

Inventory Levels

The Inventory Level index is 47.4, up very slightly (+0.9) from May’s reading of 46.5, and once again indicating slight inventory reductions. This month, Upstream respondents indicated slight inventory expansion at a value of 51.5, while downstream returned robust reduction with a value of 37.0. This is the reverse of last month, when Upstream was seeing small decreases at 44.2, and Downstream was seeing slight increases at 51.6. There were also significant fluctuations throughout the month. Early respondents returned a value of 40.5, showing a significant reduction, and later respondents returned 51.7, a slight growth in inventory levels. As mentioned above, this may be evidence of firms beginning to stock up ahead of peak season.

When asked to predict what conditions will be like 12 months from now, the average value is 69.5, up (+4.0) from May’s future prediction of 65.5. Upstream respondents returned 74.3, while downstream respondents returned 57.4. Both groups expect inventory levels to increase over the coming year, but upstream respondents average 16.9 points higher in their expectations of inventory growth.

Inventory Costs

Inventory costs read in at 63.6, down (-1.6) from May’s reading of 65.2 but still indicating a strong rate of expansion. The current value is 6.5 points higher than last year, and 20.2 points lower than two years ago. Unlike the divergence we saw with Inventory Levels, Upstream and Downstream respondents returned nearly identical values (63.6 and 63.5 respectively). This is likely indicative of the former accruing storage fees while the latter continues to turn goods over more quickly. We did however see a shift in this metric during the month as early respondents showed an average value of 56.9, and later respondents showed an average of 67.9.

Predictions for future Inventory Cost growth is 75.5, down (-1.5) from May’s future prediction of 77.0 but still representing a robust forecasted expansion. Once again, Upstream firms are more optimistic, forecasting a growth rate of 78.5 to Downstream’s 68.5.

Warehousing Capacity

The Warehousing Capacity index read in at 52.6 in June, down (-3.0) from May’s reading of 55.6. This reading indicates a very slight expansion of available space. Historically, storage space often begins to disappear as we move into the second half of the year, it will be interesting to see if we will see this metric dip back into contraction at some point over the next few months. In a reverse of what we observed with inventories, Downstream firms reported contraction (68.1) while Upstream firms reported expansion in available capacity. This may be reflective of the more constrained space that many retailers operating in more urban areas often deal with.

When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Capacity to expand at a rate of 54.7, down (-1.5) from May’s future prediction of 56.2. Upstream respondents are predicting slower (though non-significantly) rates of growth in future Warehousing Capacity than Downstream respondents (52.2 to 61.5).

Warehousing Utilization

The Warehousing Utilization index read in at 52.6 in June, down (-11.4) from May’s reading of 64.0. This metric has ping-ponged back and forth over the last four months, the movement from May to June is not dissimilar for the move that occurred between March and April. What is consistent thought is that, despite changes in speed, this metric has remained in expansion territory throughout the history of the index. This reading of 52.6 is the second lowest ever, ahead of only the reading of 52.5 from last July. In addition, there was an 11.3-point split between Upstream (55.7) and Downstream (44.4) respondents. This is the mirror image of May when Downstream respondents reported greater levels of growth.

When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Utilization to increase at a rate of 64.9, down (-10.1) from May’s future prediction of 75.0 but not far from April’s prediction of 65.8. Upstream expectations are slightly higher than their Downstream counterparts (66.4 to 61.1).

Warehousing Prices

The Warehousing Price index read in at 64.5, down very slightly (-0.4) from May’s reading of 64.9. This reading is slightly up 1.2 points from the reading one year ago, and also down a sizable 13.9 points from the reading two years ago when supply chains were bursting with excess inventories and inflation was nearing its peak. As would be expected given the differences in inventories, Upstream firms reported faster rates of expansion than their Downstream counterparts (67.1 to 56.5).

When asked to predict what conditions will be like 12 months from now, respondents expect Warehouse Prices to increase at a rate of 67.6, down (-8.2) from May’s more robust prediction of 75.8. Unlike what we saw with the other warehousing metrics, Downstream firms are expecting greater rates of expansion than their Upstream counterparts (71.7 to 66.2), likely reflecting an expectation of high levels of consumer activity and the expensive urban warehouses that will be required to meet it. It is clear that respondents across the board are anticipating increased storage costs over the next 12 months.

Transportation Capacity

The Transportation Capacity Index registered 50.0 in June 2024. This constitutes a drop of 7.3 points from last month’s reading. With this second consecutive drop, the Transportation Capacity Index is now at the lowest level seen in more than two years. The Upstream Transportation Capacity index is at 51.4, while the Downstream index is at 46.2, a difference that is not statistically significant.

The future Transportation Capacity index is also down 7.3 points, now indicating 43.6, falling below the critical threshold and indicating expectations of contraction in Transportation Capacity over the next 12 months. The Downstream future Transportation Capacity index is at 53.8 while the Upstream future Transportation Capacity index indicates 39.7. As such, the expectations of contraction in Transportation Capacity are quite strong Upstream, while the Downstream Transportation Capacity is forecasted to remain relatively stable, even showing a slight increase.

Transportation Utilization

The Transportation Utilization Index is down 3.5 points from last month, indicating 55.7 in June 2024. Despite this drop, the index remains above the critical threshold and continues to indicate slight expansion. The Downstream Transportation Utilization Index is now at 46.2, while the Upstream index is now at 59.2.  This difference is statistically significant, indicating that transportation activity is dropping Downstream while it is still increasing Upstream.

The future Transportation Utilization Index increased slightly and continues to indicate expansion at 70.0 level for the next 12 months.  The Upstream Transportation Utilization index is at 72.5 while the Downstream index is at 63.5, with the difference not being statistically significant.

Transportation Prices

The Transportation Prices Index indicates 61.0 in June 2024, which corresponds to an increase of 3.2 points from the previous month. With this small increase, the Transportation Prices remained in expansion territory, signaling the persistence of inflationary pressures on the transportation costs. These inflationary pressures relatively uniformly felt across the supply chains, with Upstream index at 61.6 and Downstream indexes at 59.3, but this difference is not statistically significant.

The future index for Transportation Prices increased 9.8 points and is now at 79.8 points and continuing to indicate strong expectations of higher Transportation Prices in the next 12 months.  The Downstream Transportation Prices index is at 77.8 while the Upstream Transportation Prices index is at 80.6.  As such, expectations of higher Transportation Prices over the next year are quite strong in both Upstream and Downstream, across the supply chain.