Another sign of a potential inflection point in the freight cycle was provided Tuesday in a report highlighting data compiled in the Logistics Managers’ Index (LMI).
“The freight recession is still ongoing, but in a continuation of what we have observed since late July it seems that cracks in the recession are beginning to form,” the report read.
Transportation prices (43.5) fell again in September but the rate of decline has improved from the record pace set in May. The data set was down just 1 percentage point year over year (y/y) during the month. Downstream companies closer to the consumer (retailers) returned a neutral pricing reading of 50 compared to a 39.7 reading from upstream companies (wholesalers and manufacturers).
The survey of supply chain executives is a diffusion index. A reading above 50 indicates expansion while one below 50 signals contraction.
The transportation pricing subindex stood at 46.8 during the last two weeks of September compared to a 38.5 reading in the first half of the month. When asked to peg transportation rates one year from now, respondents returned a reading of 69.4.
“If downstream firms do move into a state of expansion in the coming months, the chance that we break out of the ongoing freight recession will continue to increase.”
The overall LMI (52.4) expanded for a second straight month and was 1.2 points higher than in August. But the new level established in September is still well below the 7-year-old index’s historical average of 62.9.
“This second consecutive expansion provides further evidence suggesting that the move towards growth in August was not a one-off occurrence and may have marked a turning point back towards growth in the logistics industry,” the report said.
The report said it is unlikely for the index to retreat in the seasonally stronger fourth quarter but acknowledged that a government shutdown or widespread strikes among auto workers could weigh on the data set.
Inventory levels (47.4) declined slightly again during September but remained in contraction territory for a fifth straight month. However, inventories at companies with more than 1,000 employees expanded modestly, with the group logging a 51.6 reading. That compared to a contractionary, 40.2 inventory level at small firms.
The total reading for inventories was 24.5 points lower y/y.