February Logistics Managers Index Shows Significant Changes

The Logistics Managers Index (LMI) was just released for February 2023. It shows some big changes and some of the lowest transportation numbers in the history of the LMI. ASU Economist Dale Rogers joined Arizona Horizon to examine these changes.

February is often a low point seasonally due to the consumer spending hangover from the holidays in the U.S. combined with slowness in imports due to Chinese New Year, and that was certainly reflected this year. Economists are hoping that they will pick back up sometime in quarter 2 as retailers begin to rebuild inventories ahead of back-to-school and holiday shopping, but that hasn’t happened.

The LMI takes a look into monthly inventories, warehousing and transportation. Economist Rogers describes those three concepts as the “leading indicators of the economy.”

New report shows back to back increases. Unusual?

“We’re seeing mixed messages,” said Rogers. “Transportation prices are decreasing at the fastest rate we’ve ever seen. We’re kinda in a crazy time. Demand is going up still in some cases, but certainly transportation prices is going down.”

Auto market supply and demand

Ted points out that a used car today is even more expensive as compared to a new car of that same model. Rogers explains more.

Rogers predicts this issue won’t last much longer. “I think some of the car companies made huge mistakes in managing supply chain issues,” said Rogers. “I think probably Ford believes that they lost 100 million dollars worth of sales last year because they didn’t have some things they needed.”

Return to normalcy?

When asked when the economy would return back to normalcy, Rogers said, “A lot of us think fourth quarter this year is going to be a tough quarter. As we get to the end of the Fall, it looks like the Fed is going to keep raising the interest rate.”

The reasoning behind this is due to broken supply chains. “The Fed doesn’t have tools to deal with broken supply chains. All they can do is raise or lower the interest rate and that doesn’t really help us,” said Rogers.

Rogers predicts that by middle of 2024 things will resume back to normal.