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A leading supply chain economist and data from a trucking industry research company show warehouses are filling up in advance of what could be a very busy holiday season.
According to the October Logistics Manager’s Index Report, the LMI skyrocketed to 71.6, up by more than 20 points from six months ago, when it reached an all-time low of 51.3 in April. The report also says inventory levels are at their highest point in more than 2½ years as retailers rapidly restock and anticipate an improving economy. In October 2019, the LMI was at 54.4.
Dale Rogers, a business professor in the department of supply chain management of the W.P. Carey School of Business at Arizona State University, is one of the survey’s authors. He told Transport Topics the October index is evidence the trucking and logistics economy is surging.
Spot market demand keeps pressure on pricing: As shippers continue to turn to the spot market to move freight, van and reefer rates keep rising as we head into the holiday season.https://t.co/Hall4Ojl4P— DAT Freight & Analytics (@LoadBoards) November 10, 2020
“It’s incredible how all of the indicators are going up,” Rogers said. “I think people are betting this will be a big Christmas. So businesses are positioning inventory, warehouses are full, warehouse prices are going up, transportation prices are going up.”
The LMI report said transportation prices have jumped by 30.5% since March as trucking industry capacity has tightened.
“Transportation prices are increasing at a significant rate and are likely to continue to do so as we near the Q4 retail season — particularly with e-commerce projected to increase by 50% year-over-year.”
“It is an economy that is popping back up, but is it going to last? That’s a question that I just don’t know,” Rogers said.
Researchers at ASU, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada-Reno, and in conjunction with the Council of Supply Chain Management Professionals, produce the monthly report. The LMI comprises components that make up the logistics industry, including inventory levels and costs, warehousing capacity, utilization and prices, and transportation capacity.
Eight months into the COVID-19 pandemic, the trucking, freight and logistics industry economy is performing far better than the overall U.S. economy.
The latest data from DAT Freight and Analytics also shows trucking industry capacity is tight, and contract and spot rates are at some of the highest levels they have been at in years.
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The van load-to-truck ratio is a sensitive, real-time indicator of the balance between spot market demand and capacity. The ratio was up 156.3% in October compared with the same period in 2019. Van spot rates are up 33% year-over-year.
The flatbed load-to-truck ratio was up 243.4% year-over-year, and rates are up 12.7% year-over-year.
The refrigerated load-to-truck ratio is up 155.3% compared with October 2019, and rates are up 22.2% annually.
The national per-mile rate for vans was $2.47 in October, up 7 cents from September.
Flatbed rates were $2.44 per mile, down 1 cent from October.
Refrigerated rates jumped to $2.70 per mile, up 12 cents from September.
“As shippers continue to turn to the spot market to move freight, van and [refrigerated] rates keep rising as we head into the holiday season. Flatbed demand did slip, however,” the DAT report said.
American Trucking Associations Chief Economist Bob Costello told Transport Topics he’s generally optimistic about the state of the trucking’s economy. Still, he is less sure about the overall condition of the U.S. economy.
“Trucking continues for the most part — not exclusively, but for the most part — on the good side of the economy, because goods are doing better than services,” Costello said, pointing out that retail giants such as Walmart and Amazon.com Inc. are reporting record business while service industry stalwarts such as restaurants and hotels are slumping.
The latest jobs report from the Labor Department on Nov. 6 showed the nation’s unemployment rate fell to a better-than-expected 6.9%, and the number of unemployed decreased by 1.5 million to 11.1 million.
The report said transportation employment increased by 63,000 in October.
In warehousing and storage, 28,000 jobs were added. Transit and ground passenger transportation added 25,000, and trucking added 10,000.
Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, told Transport Topics that while the unemployment numbers were better than most economists had forecast, the U.S. economy is not in the clear yet.
He said the multitrillion-dollar federal Paycheck Protection Program and other stimulus initiatives saved the economy in the third quarter when gross domestic product shot up a record 33.1%. But that increase was only slightly higher than the second-quarter GDP drop of 31.4%.
“The shot in the arm for the spending that happened in April and May that jump-started the economy with the stimulus checks and extended unemployment benefits, that money is over now,” Dhawan said. “Now, the economy’s growth depends on the COVID-19 virus, and how it progresses and what activities can remain open, and it’s not looking too good.”
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