Looking at logistics pros and cons early into 2023

With 2023 underway, it is time to take a fresh look at where things stand, as they relate to key trends and themes germane to all things supply chain, logistics, and freight transportation.

To be sure, things have changed on various fronts, especially when viewed against the backdrop of nearly three years ago (it is hard to believe it has been that long), at the onset of the pandemic. It is fair to say we all remember those times very well, and it almost definitely goes without saying that those were, on balance, not terribly good times, with the economy essentially shutting down and people confined to their homes, in adherence with shelter-in-place directives, for the most part.

Now, things are clearly different, with far more of a normal feel and rhythm to them, to be sure. That is something that is obviously welcomed and appreciated, no question about it. But just because we have gotten back to that point, by no means, is a signal that our logistics problems are gone and all is well (they are not).

In what ways? There are a few, with some having impacts in different ways, depending on what type of industry stakeholder you are. But, at the end of the day, they are all related. A quick example may be how do declining U.S.-bound imports affect domestic freight movements? For one thing, it clearly translates into lower volumes, and, more than likely, lower rates. That is obvious a pretty basic, top-level one, but it could very well speak to market conditions over the first half of 2023, we will have to see.

At a top level, when looking at both the freight economy and the general macroeconomy, there are myriad things that influence and impact both parts.

A good place to start may be inflation. Earlier this week, the United States Department of Labor’s Bureau of Labor Statistics (BLS) reported that the annual inflation rate, for the month of December, came in at 6.5%, lower than the 7.7% and 7.1% reported for October and November, respectively, declining for the sixth straight month. Yes, this is clearly still too high, but it represents ongoing progress, which cannot be ignored.

And as previously noted in this space, a 2022 LM survey, based on feedback from 100 freight transportation, supply chain, and logistics stakeholders, reinforced the impact of how inflation has continued to affect things, from both an operational and business perspective. As for how, or in which ways, some of the key themes focused on things like capacity constraints across multiple modes; rate and price increases; rising fuel prices; supply chain unreliability; surcharge and accessorial increases; raw material price increases; delayed orders and longer lead times; and a shipping container imbalance, among others.

因此,通货膨胀又下来是一个好迹象,佛r sure. Another dataset widely viewed in freight and logistics circles, which is also seeing declines, is the national average price per gallon, for diesel gasoline. Based on data from the Energy Information Administration (EIA), through the week of January 9, the national diesel average has fallen in eight of the last nine weeks, albeit the average still being pretty high, in the $4.50 per gallon range. But it is nice to see some relief at the pump, as we all know the reactionary effects, for businesses and consumers alike, as they relate to high prices. Yes, prices remain high and could remain in this range, for a while, given the ongoing Russia-Ukraine conflict, as well as OPEC-driven and influenced production output.

Lower inflation and diesel prices are both two things to feel positive about early into this new year, in addition to still pretty solid employment numbers. Which leads to things that remain concerning.

On that list are declining U.S.-bound imports, with volumes down over much of the second half of 2022, with the expectation that will remain the case into the first half of 2023, returning to pre-pandemic levels.

In the recent Port Tracker report issued by the National Retail Federation and maritime consultancy Hackett Associates, Ben Hackett, Founder of Hackett Associates, observed that his firm is hopeful that the downward pressures on demand will be short-lived, with a return to growth by the second half of 2023, adding that despite a falloff in the second half, 2022 was bolstered by record-setting monthly totals in the first half of the year thanks mainly to continued strength at East and Gulf Coast [ports] as carriers shifted from congested West Coast docks.

“与去年春天的强劲表现相比,first half of 2023, is forecast to experience a year-over-year import decline of nearly 17%, with the Transpacific trade suffering a drop of over 20%,” he commented. “Nonetheless, as inflation eases and consumer spending returns, we project that growth will slowly return going into the second half of the year.”

Declining industrial production and manufacturing data will also require a watchful eye early into 2023. That was evident in the most recent edition of the Institute for Supply Management’s most recent batch of data, for December, which indicated that the report’s key metric, the PMI, came in at 48.4 (a reading of 50 or higher indicates growth), down 0.6% from November’s 49.0, contracting, at a faster rate, for the second consecutive month. The last two months of contraction were preceded by a stretch of 29 consecutive months of growth. The December PMI is at its lowest level since May 2020’s 43.5 reading. And the PMI is 5.1% below the 12-month average of 53.5, with December marking the lowest reading over that period and February 2022’s 58.6 marking the highest.

While those numbers are not ideal, the PMI reading was in the lower end of its 48-to-52 estimate, coupled with the fact that the sector had been running hot over much of the duration of the pandemic. ISM attributed the recent declines to production levels coming down, as well as lower levels of demand serving as a catalyst for lower prices, faster supplier deliveries, and lead times coming down but not enough.

Looking at this admittedly selective mixed bag of data, combined with an anticipated recession, leaves things somewhat open-ended, at the moment. Consumer demand, while not where it previously was, is still decent, om the heels of record levels set during the pandemic. All of that said, the outlook for 2023 remains pretty open; now, we will see where things go from here.