Home Business Bandwidth is increasing, prices are rising slowly in April

Bandwidth is increasing, prices are rising slowly in April

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Activity across the supply chain rose to a healthy level in April, but growth slowed to its lowest level since January 2021, according to a monthly poll released on Tuesday. Declining traffic figures, especially increased capacity, have served as a catalyst.

The Logistics Managers Index (LMI), an indicator of supply chain conditions, was 69.7 in April, down 6.5 percentage points from a March record. The index remained above the average of 65.3.

LMI is a diffusion index when a reading above 50 indicates expansion and a reading below 50 indicates a reduction.

The transport capacity sub-index was 56.9, up 11.2 percentage points from March readings and returning to expansion for the first time since May 2020. Growth rates were higher for wholesalers and distributors upstream (59.1) than for companies downstream to end consumer (53.8).

“The trend line is now gaining a noticeable U-shape, as the increase in capacity in April 2022 begins to resemble the growth rate in the early stages of blocking in April 2020,” the report said.

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The forecast sentiment for the twelve-month survey showed that the index will be at 62.4 in a year, with companies engaged upstream expecting greater weaknesses in supply than those downstream.

“This may indicate that we will see a situation similar to 2018-2019, when consumer retail demand supports the freight market in a slowdown in industrial demand,” the report said.

The Purchasing Managers’ Index (PMI), a U.S. manufacturing activity index, fell 170 bp in April to 55.4, according to a separate report on Tuesday. The data set remained in expansion mode, but April was the lowest since July 2020.

With the growth of transport capacity, price growth slowed during the month. The sub-index of transport prices fell by 15.8 percentage points to 73.9. This was the second largest decline recorded in the index. The first days of the pandemic, April 2020, led to a drop of 27.9 points.

The future pricing index is still showing growth. However, the forecast expectation of 68 was below the level of 80.6, recorded just a month ago.

Source: LMI

“We have often stated that transport performance is the most dynamic part of the LMI and most reflects the economy as a whole,” the report said. He noted that any inversion in the chart usually occurs when there have been shifts in the wider economy. “It can be seen that the two curves have not yet been reversed, suggesting that although the frantic pace of the transport market has slowed, we have not yet moved into a complete recession.”

Transport traffic (64.3) increased, but at a slower pace in April. The sub-index fell by 550 bp. since March.

“At the moment, the overall figures show that the freight market is regressing back to the average,” the report said. “Smaller carriers, or perhaps carriers that have only recently entered the market to take advantage of the growth rate, may struggle with lower demand as shippers will be able to move away from the spot market and return to contract rates with more well-known carriers. ”

“The economy is clearly in a difficult place”

The report notes the contrast between economic conditions. On the one hand, GDP is negative and the stock market is buying up. On the other hand, consumer spending increased in the first quarter, unemployment remains very low and wages are rising. But the risk remains inflation, which has been caused by rising fuel and gas prices.

The blockade in China has slowed the country’s PMI to 47.4, which is “sadly declining,” the report said, and it is the lowest level since the first days of the pandemic. “It’s not unreasonable to expect a slowdown in U.S. ports sometime in the second quarter, similar to what we saw in 2020, followed by congestion as importers seek to catch up.”

The report warns that, unlike the 2020 blockades, U.S. consumers have not stayed home this time. It follows that the cost of goods will compete with the cost of services, “limiting the potential lifeline [final-mile delivery] used by the fleets after the previous closure in China. “

Inventories have increased, places are hard to find

The level of inventories (72.3) and the value of inventories (87.7) continued to grow, but the growth rate was from recent highs: both indices fell by 3.3 percentage points over the month.

Source: LMI

With increased inventory, available storage space is limited. The sub-index of storage capacity (40.8) showed that the available space for the month decreased at a slower pace. The index has been below 50 for 22 of the last 24 months.

“Since the COVID-19 outbreak, storage space has been at a cost, and the oversupply of stocks currently held by firms has only exacerbated the problem,” the report said. A warning flag has been raised that capacity could be further reduced if Chinese blockades are lifted and freight flows arrive en masse in the United States. “Of course, there will probably be the next rebound period, during which the next flow of goods will come and the demand for storage capacity is growing, which will put a new wave of pressure on this space.”

Sub-indices of warehouse use (70.9) and prices (85.8) cooled but remained in the expansion area.

“We can watch supply chains reboot than we see consumer sentiment weaken. Consumer spending has also held back the economy during the downturn in 2019, but whether this can continue amid the highest U.S. inflation since the early 1980s, as well as slow overseas growth that limits trade, remains an open question. ”

The LMI is a collaboration between the University of Arizona, the University of Colorado, the Rochester Institute of Technology, Rutgers University, and the University of Nevada in Reno, in collaboration with the Supply Chain Management Specialists.

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