Growth up at rising rate for US inventory costs, warehousing prices

The US LMI was 51.2 in August this year—a marked change as the overall index had registered three consecutive months of contraction before that month and five consecutive months of registering new all-time low scores. In contrast, this is the fastest rate of expansion since February.

The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilisation, and prices, and transportation capacity, utilisation and prices.

The August expansion is driven by increased activity across all eight sub-metrics of the index. Inventory levels are still contracting, but at a much slower rate than July’s reading of 41.9, which was the steepest rate of contraction in the history of the index.

This has led to an increase in inventory costs and warehousing prices.

Transportation utilisation moved out of contraction and the rate of transportation price contraction slowed considerably.

“It is not yet clear whether this move back towards expansion is a one-off deviation from the contraction we had been seeing or represents a pivot back towards expansion remains to be seen. However, it does appear that the increase in activity we observed in the second half of July has spilled over into August,” LMI said in a press release.

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 recently.

It will be interesting to observe what an increase in logistics prices does to the economy, LMI observed.

Aggregate logistics costs jumped up 18.6-points to a reading of 175.3 in August—a marked change from the trends that have been observed over the last 18 months.

The greatest source of increased costs in August was inventory costs. Factors behind this increase include a lack of storage capacity and a restocking of inventories at large firms.

The restocking of inventories at large firms was behind the slowdown in the rate of contraction for inventory levels.

US import data suggests that inventory is likely to remain low this season, with the National Retail Federation predicting imports to be down slightly in September and October. Imports into the west coast ports have been down throughout this year, and empty containers going back to Asia to be refilled are down as well.

Fibre2Fashion News Desk (DS)