Supply chain bottlenecks ease as tight trucking market sees relief

Supply chain pressure on the U.S. economy has fallen to its lowest level since December 2020 as activity in the trucking sector begins to cool after peaking in the first quarter, according to a new report from the June 7 Logistics Managers Index.

The index fell to 67.1 in May, the second straight monthly decline from a record high of 76.2 hit in March, as rapidly rising warehousing and inventory costs outpaced slower growth in transportation prices.

The rate of inventory growth fell to 69.3 for a third month from February’s record high of 80.2 as carrying capacity rose for the second month after contracting two years in a row in a tight trucking market due to the pandemic.

The IMT’s transport capacity measure for April moved from contraction to expansion for the first time since June 2020, indicating that there was more transport capacity available than the previous month.

The growth rate for April is up 23.7 points from April 2021, but down 5.3 and 14.1 points from the same period in 2020 and 2019 respectively.

The report cites the 56.1% rise in US PMI levels after falling in April and March as a sign of expansive economic growth.

Survey respondents predict moderate expansion rates for the transportation industry, with a possible slowdown down the line, but they don’t expect a return to rapid gains in 2021.

“The logistics sector continues to expand, driven primarily by strong growth in inventory and warehousing measures,” according to the report.

“We are still seeing a healthy growth rate in transportation, but that pales in comparison to the unsustainable growth rates seen in 2021.”

It comes as the shipping industry faces a shortage of experienced truckers and the highest average diesel prices in decades, at $5.684 a gallon, which is not expected to decline until more crude oil will likely be available around 2023, according to supply experts.

Increased trucking capacity has pushed transportation costs to their lowest levels since June 2020, allowing the industry to grow, despite an expected increase in shipping prices over the next year, according to investigation.

“Intensity is much lower and now approaching levels last seen two years ago,” the report says and that “fortunately, in a world of bottlenecks, transport appears to be reopening.”

Warehouses and inventory continue to grow at a “similar pace to what we have seen over the past 18 months,” the report said, as inventory levels are “fairly high for the season, packing warehouses to the gills and driving up costs for both inventory and storage”.

The trucking, warehousing and delivery markets gained 32,900 jobs in May, down slightly from 44,700 in April.

Trucking companies accounted for 13,300 jobs in May, with a total gain of more than 70,000 over the past year, with some of the increase coming in part from owner-operators joining larger companies that are less vulnerable to diesel costs and spot market shifts.

Small carriers tend to struggle with higher fuel prices because they are more constrained in their ability to purchase diesel fuel at wholesale prices.

The warehousing and storage sectors added 17,700 positions in May, for a total of 176,700 new positions in the first five months of 2022.

With the exception of the drop in March, the transportation sector has added jobs every month since April 2020.

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Bryan S. Jung is a New York native and resident with a background in politics and the legal industry. He graduated from Binghamton University.

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