The excessively high price of diesel and slowing freight rates appear to have caused something of a knee-jerk reaction, leading some insiders to believe the trucking industry sky was falling. But recently released data points to another, possibly more positive conclusion.
Known as the Logistics Managers Index (LMI), this metric involves supply chain researchers tracking movement and growth rates in the U.S. Producing a bi-monthly measurement regarding activity, researchers including Zachary S. Rogers (Colorado State University), Dale Rogers (Arizona State University), and Rudolf Leuschner (Rutgers University), published their initial findings in 2018.
“Many measures of economic activity, such as GDP or GNP, are backward-looking in that they report economic growth and contraction after it has already happened, at the final point of consumption. While there is value to lagging indicators, such as GDP, their primary value is not predictive. The purpose of this index is to track and compile metrics which we believe are leading, predictive indicators of the economy,” the researchers reportedly stated. “The metrics used in this endeavor are elements of inventory, warehousing, and transportation. These three metrics are useful as leading indicators because they track economic movement both downstream, near the point of consumption, and upstream within the supply base.”
Recent LMI findings generally agree with others in the freight hauling professions that rates are falling. In fact, the LMI dropped from a two-year peak of 72.2 in March to 69.7 in April. It’s important to keep in mind the LMI only crossed the 70-threshold five times. The decline has also positioned the measure at its lowest since January 2021 and represents the first dip of 2022.
All these indicators appear consistent with other freight sector evaluations that diesel prices are soaring as rates are in retreat. That might seem like a perfect storm except for the fact that 2021 sent freight rates into the stratosphere as supply chains were overheated and delays persisted. A quick look at LMI metrics shows that the trucking industry may simply be returning to some semblance of normalcy after a global economic slowdown followed by the floodgates of international commerce bursting open.
“Despite the slowdown in transportation, respondents still indicate growth in the sector, just at a slower pace than what we’ve seen over the last 18 months,” an LMI report states.
Although the metrics used to predict the trucking sector trajectory and the overall economy are heading in seemingly opposite directions, the upheaval over the last two years split capacity and cost apart. At some point, cost and capacity metrics were likely to move closer together, and that may be what the trucking industry is experiencing right now. Conclusions from the LMI indicate that only if rates drop below the capacity metrics is the country experiencing a significant economic change.
“Inventory and warehousing metrics remain elevated, but transportation has clearly slowed. Whether this slowdown will result in recessionary pressures or is simply the market moderating towards more sustainable levels, remains to be seen,” an LMI report states.
Sources: rutgers.edu, ajot.com, the-lmi.com
What’s normal the broker making millions the driver making couple cents and the customer moving freight for free
Why are the brokers always the bad guys? No one is forcing you to haul their freight, if you don’t like the rate quit crying and move onto something else or if you can’t make a living in trucking move on
When they say normal, why when you bring your truck to a dealership like freightliner, most all parts are on national back order? Fuel at a record high rates are falling. LMI seems to b using different metrics from a different era, or just smoking recreational goods before going to work.
Getting back to normal, and let’s quote vp Harris, HA, HA, HA