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U.S. Logistics Pressure Matrix

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U.S. Logistics Pressure Matrix Shows Softer Demand, Lower Rates

Flexport’s Logistics Pressure Matrix (LPM) gathers 10 data points in an attempt to provide a picture of the challenges facing logistics networks from the demand side and a view of ongoing activity on US-inbound routes. In the latest update key measures of demand in personal spending declined, while the level of inventories held by retailers rose. That may be taking pressure off logistics networks. The time taken for the first stage of ocean shipping is now at its fastest since December 2020, while shipping rates from Asia to North America hit their lowest since September 2021.

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The Methodology: The Flexport Logistics Pressure Matrix (LPM) brings together 10 data points clustered into two groups: demand measures covering consumers and industry; and activity measures which show the state of logistics networks. The measures are US-centric and mix a variety of weekly and monthly measures. The LPM is updated every Tuesday with the latest data points from the prior seven days. More details on the measures and the reasons for their inclusion can be found in our in-depth research report published January 21, 2022.

Week to October 5, 2022 Here are the latest updates to the Flexport Logistics Pressure Matrix. Full details and charts can be found below:

Personal consumer spending on durable goods, a major driver of demand for logistics services, fell by 0.4% sequentially in August vs. July. At the same time, the level of inventories held by retailers as a proportion of their sales increased to 1.18x from 1.16x. U.S. imports, adjusted for inflation, fell by 1.0% in August vs. July, though they are still 10.5% above January 2019’s level. While retail demand may be falling, manufacturers still, nonetheless, expect growth in their import orders.

Air and ocean freight timeliness both continued to improve. Air freight shipping is now its fastest on Asia-North America routes since May 2021. The time taken for ocean freight to progress from cargo-ready to origin port departure improved to the fastest since December 2020. The reduced pressure on networks can also be seen in shipping rates from Asia to North America, which fell to their lowest since September 2021.

The Logistics Pressure Matrix is colorized in 10 grades from red (measure represents high pressure on logistics networks) to green (low pressure) relative to the period from January 2019 to date. So, falling retail sales tends to be “green” as it represents reducing demand pressure on logistics networks while a high level of deflated imports would be “red” in indicating reduced flows.

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Demand Measures

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Personal Consumption Measures (Updated September 30, 2022): U.S. real personal consumption measures saw spending on durable goods decline by 0.4% sequentially in August versus July. Spending on nondurables was 0.1% lower sequentially.

Personal consumption measures were updated to use real data in line with rising inflation, giving a more complete view of activity. A decline in the order of over one percentage point per month over a protracted period would be needed to signal a clear relaxation of demand pressures on logistics networks.

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Forward-Looking Confidence Measures (Updated October 3, 2022): Consumer expectations improved again in September, as shown above. The improvement may be connected to falling gasoline prices. That leaves them at their highest since May but still well below levels from earlier in the year. In turn, that may represent consumers' uncertainty to ongoing challenges from inflation and geopolitics.

Industrial import expectations were broadly unchanged in September versus August at 52.6. A sustained decline below 50 (the level indicating a neutral outlook) would be needed to assume reduced pressure on logistics networks. Notably, though, overall manufacturing activity fell to its lowest since May 2020, while export orders have been falling since August.

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Retail Sales & Inventories (Updated September 28, 2022): U.S. retail sales, excluding autos, fell by 0.5% sequentially in August versus July, while year over year growth dipped to 9.8% from 13.1%. The sequential dip was the first since December. A sustained slowdown in real sales will be needed to reduce pressure on logistics networks.

Retail inventories increased 0.6% sequentially in August on a seasonally adjusted basis. That meant that the retail inventory to sales ratio for July increased to 1.18x. While lower than the 2009 - 2019 average of 1.24x, it is a marked recovery from the 1.06x which applied during 2021 until December.

Activity Measures

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Warehouse Pricing (Updated September 20, 2022): The price of warehouse storage space dipped to the lowest since March 2021 in early September. While the series is volatile, it has now fallen for three straight months and is now 0.5% lower than a year earlier on a trailing three-month average basis. Lower warehouse pricing may represent reduced pressure on logistics networks as firms work down inventories. For more information please see our warehouse pricing explainer report.

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Deflated International Trade Data (Updated September 28, 2022): U.S. imports fell by 1.7% sequentially in August versus July, but remained up by 13.1% compared to August 2021 on a seasonally adjusted basis. Commodity price inflation likely played a part, especially energy which may be a lagging component of the deflator. The change in value of imports less the change in import prices fell by 1.0% in August vs. July. That left the index of deflated imports at 110.5 where 100 indicates the level in January 2019.

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U.S. Port Handling (Updated September 12, 2022): Containerized, ocean freight imports to U.S. ports – adjusted for days in the month and rebased to the 2019 average equalling 100 – shows containerized freight imports to all U.S. ports increased by 2% in August versus July. That’s inline with the average seasonal direction for the data in 2019 to 2021.

It leaves shipments 0.8% lower year over year, but still 14% above the same month of 2019. That would suggest pressure on ports from the volume of imports remains broadly unchanged from 2021 levels.

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China-to-U.S. Shipping Rates (Updated September 30, 2022): The four-week trailing average of the Shanghai Shipping Exchange’s China-US West Coast and China-US West Coast and China-US East Coast indices fell by 4.6% in the week to September 30, marking a 15th straight down-week after six weeks of improvements left the measure at a record high. Rates are now 18.4% below their June peak and are at their lowest since September 17, 2021. Declining shipping rates are a sign of falling logistics congestion.

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Ocean Freight Handling Times (Updated October 2, 2022): The Stage 1 Index of ocean timeliness, which outlines the time taken to go from Cargo-Ready to Origin Port Departure on Transpacific Eastbound routes on a trailing average, rebased basis, was 0.2% lower in the four weeks to October 2 versus the four weeks to September 25.

That leaves the measure 44% below its peak and at its lowest since December 2020. Some caution is needed though given that there is seasonality in the series and given that recent improvements may have reflected reduced manufacturing in Asia. Data for the complete ocean transit journey can be found in Flexport’s Ocean Timeliness Indicator.

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Air Freight Handling Times (Updated October 2, 2022): The Flexport Air Timeliness Indicator (ATI) shows the time taken to go from cargo consolidation to final delivery in days, averaged over the prior four weeks. In the latest reading the time taken to transit Transpacific Eastbound airfreight declined to 9.8 days. That’s the fifth straight decline and was also the lowest since early May 2021.

Please direct questions about the Flexport Logistics Pressure Matrix to economics@flexport.com.

Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.

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