Transportation capacity historically low; prices show no sign of slowing

From Freight Waves.

“Growth is increasing at an increasing rate” across most components of the supply chain, according to a Tuesday report.

The Logistics Managers’ Index stepped 2.3 percentage points higher from March to 74.5% in April. This was the second-highest reading the dataset has logged in its nearly five-year existence.

The LMI is a diffusion index wherein a reading above 50% indicates expansion and a reading below 50% indicates contraction. The survey is designed to capture the rate of change in areas like transportation, inventory and warehousing.

“The re-heating of the economy has been interesting as pent-up demand has led to a ramp-up in both the consumption and production of consumer and industrial goods,” the report read. “The tightness that has been observed in the logistics industry over the last nine months continued unabated in April 2021.”

The transportation capacity subcomponent of the index increased 2.8 percentage points to 33.2%, still “historically low” and firmly in contraction territory. The report described the capacity environment as “one of the tightest transportation markets we have ever measured.”

This has been most evident in the truckload market, where carriers are still rejecting one in every four loads under contract.

A strong consumer, the need for inventory restocking and a severely diminished driver pool remain the catalysts for the tight capacity dynamic. Asked their expectations on the capacity situation one year from now, the respondents’ collective opinion deteriorated 5.6 percentage points from March to 44%.

Transportation utilization, up 5.9 points from March to 71.9%, remained close to historical highs with transportation prices climbing 2 points to 92.6%, the highest level in the past 2.5 years.

See the complete article online at Freight Waves.