A gauge of supply chain pressure in the U.S. economy fell to the lowest level since December 2020. The fear was that the surge in demand after the coronavirus crises, which led to huge supply chain and transport cost pressures, would lead to further inflated costs because of a lack of capacity. But also, that any drop in demand would be indicative of a deeper economic slowdown.
After dropping to 67.1 in May, The Logistics Managers Index had a second consecutive decline from a record of 76.2 reached in March. This was due to faster gains in warehouse and inventory costs, which offset slower moves in transport prices.
“The logistics industry continues to expand, driven primarily by strong growth in the inventory and warehousing metrics,” according to the survey-based report released Tuesday.
“We are still observing a healthy rate of growth in transportation, but one that pales in comparison to the unsustainable growth rates observed in 2021,” according to the report.
“Fortunately, in a world of bottlenecks, transportation seems to be opening back up,”
Warehousing and inventories “continue to grow at a similar pace to the one we have observed over the last 18 months, with inventory levels that are “unseasonably high, packing warehouses to the gills and driving costs up for both inventory and warehousing.”
The LMI is compiled by several academic institutions and uses a diffusion index where 50 is the separating line between expansion and contraction.
This is hopefully an indicator that demand will remain, but supply bottlenecks are easing, and inflationary pressure easing with it.