According to a new report from the Federal Reserve Bank of St. Louis, the freight industry is slowing down. The report shows that production and shipments have declined in recent months, signaling a possible slowdown in the freight market. This could be bad news for businesses that rely on freight shipping to move their products.
Based on Cass Transportation Index, the U.S freight volumes started declining in April from March and the all-year-round period. There will likely be more difficult comparisons in the next few months as the world supply chain disruptions are set to intensify with an expansionary speed.
LMI represents a combination of eight unique components that create a logistic industry, including warehousing capacity, costs, inventory levels, transportation capacity, utilization, and prices.
The logistics managers index (LMI) survey shows that the economy has downshifted from a high record in March to 69.7 in April, the first drop of 2022 and the lowest level since January 2021. Transportation showed significant moves as capacity returned to a positive level for the first time since May 2020. The warehousing and inventory only exhibited modest changes. According to the report, the U.S economy is clearly in a complex place.
According to the LMI report, low trucking capacity and increasing transportation prices reflect a strong economy, which they have experienced for almost two years. In April, the two measures freight industry started to converge but failed to enter an inversion, meaning there has been a shift in the entire economy.
"Although there has been a slowdown in transportation, the respondents indicate growth in the sector. But the growth is at a slower rate than what we have observed over the last 18 months," the report added.
The two curves representing the capacity and prices have not been inverted. This suggests that although the frantic pace in the transportation sector has declined, we are yet to tilt into a full-on recession.
In conclusion, the report showed that "warehousing and inventory metrics remain elevated, while transportation has slowed. It's unclear whether this slowdown will lead to recessionary pressures or moderate the market towards sustainable levels."
Implications for Us Freight Markets
The outlook for 2022 freight volumes indicates weaker growth caused by declining economic growth and slower consumer goods spending. For supply chain operators, the outlook implies a few steps down from the high record in 2021 rates in air, intermodal, and trucking segments. Unfortunately, the potential relief rate is limited since carriers consistently face high labor costs, fuel, and equipment costs as well as numerous inefficiencies during their operations.
For shippers, the rate of sale volume growth will increase compared to 2021, leading to better management of volumes. Still, there are a few exceptions, like the export products impeded by equipment availability and operational in 2021. However, you can get more freight to ship using a quality shipper list like www.nationalshipperlist.com.
For carriers, 2022 draws the prospect of progressing and improving operations to satisfy customers better. However, carriers could also face relatively lower margins due to extreme demand/supply imbalance that dissipates, unlike 2021, when it favored carriers with high spot rates.