The LMI focuses on the growth of US domestic flows. Slower growth, faster growth, or contraction is measured for a set of eight data indicators. Writing for the team of analysts, Zac Rogers provides this summary of April outcomes:
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… Aggregate Prices hit their all-time high in March, reading in at 271.3. In April they were down (-23.9) to 247.4. As with many of the metrics in April, this is down slightly from historic, and likely unsustainable highs, but still well above the all-time average for the metric, which in this case is 223.9. The logistics industry is slowing down, but it hasn’t yet slammed to a halt.
The full report is careful, detailed and worth attentive reading. My much less careful take-aways:
- US domestic flows remain robust, but are no longer rising as fast as last year.
- Flow volumes are falling for some product categories.
- Warehouse space remains tight, but inventory levels are improving.
- Transportation capacity and utilization are much closer to what is needed for current flows.
- US consumer demand has diversified from its fixation on stuff, reducing pressure on many supply chain components.
Looking beyond the April snapshot, there is increasing concern that transportation, after months of clawing back lost capacity, will be seriously challenged as prices-for-push moderate (and diesel explodes).
The LMI also gives attention to potential upstream pinchpoints related to China’s lockdowns. Here’s how the LMI analysts combobulate what we can currently hear and see in flows from China:
It is not unreasonable to expect a slowdown at US ports sometime in Q2 that is similar to what we saw in 2020, followed by further congestion as importers race to catch up. The differences between 2020 and 2022 is that during the former, US consumers were stuck at home, and last-mile delivery of goods buoyed transportation fleets around the country. It seems unlikely that major lockdowns will reemerge in the U.S. in 2022, meaning that U.S. consumers will continue to spend on services and in-person commerce…
Yesterday afternoon the Federal Open Market Committee acted, as expected, to increase interest rates and reduce the size of the current Federal Reserve balance sheet. Justifications for these actions include, “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures…” and “COVID-related lockdowns in China are likely to exacerbate supply chain disruptions.”
To merely state the obvious: the world is moving through an extended inflection point. Demand and supply have experienced — and are experiencing — significant disruptions. War, plague, drought and other climate extremes, mass migrations, and more challenge our ability to effectively adapt. Making and finding a modicum of equilibrium continues to be elusive.