Warehouse, inventory costs and capacities decreasing
The Logistics Managers’ Index for April indicates many manufacturers are balancing their supply so as not to oversaturate markets. The LMI measures things like inventory levels, warehousing capacity and transportation capacity. Dale Rogers from ASU’s W.P. Carey School of Business joined Arizona Horizon to discuss it.
Around 200 people from different types of companies within the logistics industry are surveyed, Rogers said. “This is the lowest an LMI number has ever been. It’s a rate-of-change index, where zero means everything’s declining, 50 means staying the same, 100 means really fast growth. And the lowest number we’ve ever seen in the almost seven years we’ve been doing this was for April at just barely over 50,” Rogers said.
“We’re not in a recession,” Rogers explained. “I don’t know that a recession is coming, but we’re in a freight recession.”
The services sector is about 80 percent of the economy right now. “We’ve seen this shift following the pandemic to consumables from durables,” Rogers said. “It takes more warehouse space to ship a computer or a piece of furniture. Demand, I think, was pulled forward during the pandemic, and we’re not seeing people really buy that stuff.”
“We’re not in a good spot,” Rogers admitted. On a scale from 0 to 10, 10 being a certainty, Rogers rated the possibility of a recession at five. “I think we’re going to see something bad in the fourth quarter,” he said. “I’m going to say five because I haven’t seen the recession. I just was talking to the head of the Port of Los Angeles. He told me, ‘I don’t see a recession either, Dale.’ But things appear to be changing, and we also don’t know the impact of the banking crisis. We’re going to see more banks have problems, I think.”