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Flexport Logistics Pressure Matrix Sees Shipping Up and Confidence Down
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, we show that OTI origin conditions fall, while ATI times continue to improve slowly. Shipping rates break their streak and consumer confidence falls back.
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 May 15, 2022
Here are most important updates to the Flexport Logistics Pressure Matrix, full details and charts can be found below:
A measure of consumer confidence fell by 9.9% in May, falling back near levels seen in March. This likely represents consumer uncertainty about inflation and geopolitics. If this uncertainty results in higher consumer spending then pressure on logistics networks could increase. The opposite could also transpire if consumers start holding back spending.
The four-week trailing average of the China-U.S. ocean shipping rates increased by 0.4% in the week to May 13, marking the first increase after 11 straight weeks of decline. That left the indicator at its lowest since the end of December and may reflect reduced demand due to factory closures in the region around Shenzhen and more recently around Shanghai, but remains well above pre-pandemic levels.
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, got worse in the four weeks to May 15, climbing to 14.9% below the March peak. The measure backed away from the mid January trough, now 4.7% higher, indicating the staying power of increased congestion. Flexport’s Air Timeliness Indicator meanwhile fell back to about 2.6% higher than its early April low.
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.
Personal Consumption Measures (Updated May 2, 2022): The ratio of goods spending as a proportion of total spending, shown above, dropped to 34.8% in March from 34.9% a month earlier in nominal terms. That was still well above the 31.4% average before the pandemic. It is important to note, however, that goods inflation is outstripping services while spending preferences for nondurable goods are sliding faster than for durables. A decline in the order of over one percentage point would be needed to signal a clear relaxation of pressure.
Forward-Looking Confidence Measures (Updated May 17, 2022): Consumer expectations fell back in May, as shown above. That left expectations near the levels seen in March and may represent consumers' uncertainty to ongoing challenges from inflation and geopolitics. Should that eventually translate into higher spending, the pressure on logistics networks could rise.
Industrial import expectations dropped in April to their lowest since October, falling slightly below last month. They nonetheless remained above 50 (indicating expectations of growth). A sustained decline below 50 (the level indicating a neutral outlook) would be needed to assume reduced pressure on logistics networks.
Retail Sales & Inventories (Updated May 2, 2022): U.S. retail sales increased by 4.3% sequentially in March 2022 but remained 10.5% above March 2021 and 36.1% above the same period of 2019. It should also be noted that consumer price inflation may account for as much as half the annual increase in retail sales. A sustained slowdown in real sales will be needed to reduce pressure on logistics networks, which will start to ramp up towards the summer season.
Retail inventories increased by 3.5% sequentially in March on a seasonally adjusted basis. That meant that the retail inventory / sales rati(Updated May 6, 2022)x from 1.11x a month earlier. 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.
Deflated International Trade Data (Updated May 2, 2022): U.S. imports hit another record high in March after rising by 11.5% sequentially and by 12.9% compared to March 2021 on a seasonally adjusted basis. 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 increased by 8.5% in March vs. February. That left the index of deflated imports at 120.9, breaking a new record.
U.S. Port Handling (Updated April 25, 2022) The handling of inbound containers nine major North American seaports, fell by 0.4% on a days-adjusted basis in March 2022 versus February 2022. At 124,559 TEUs per day, March represented a near matching of activity last year. While there are reports of debottlenecking among west coast ports, congestion on the east coast has caused a build up of vessels waiting to be unloaded. Note that the data sample has been reduced from 10 ports previously due to later reporting by the South Carolina Ports Authority.
China-to-U.S. Shipping Rates (Updated May 6, 2022) The four-week trailing average of the Shanghai Shipping Exchange’s China-US West Coast and China-US East Coast indices increased by 0.4% in the week to May 13, breaking an eleven straight week decline. Rates may be starting to increase as the summer season for retail heats up.
Ocean Freight Handling Times (Updated May 15, 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, worsened in the four weeks to May 15. The measure is nevertheless still 4.7% of the mid-January trough, indicating the staying power of congestion. It’s worth noting, however, that there is seasonality in the series as it can reflect accelerated shipments into the lunar new year. Data for the complete ocean transit journey can be found in Flexport’s Ocean Timeliness Indicator.
Air Freight Handling Times (Updated May 15, 2022): We have added the Flexport Air Timeliness Indicator (ATI) to the Logistics Pressure Matrix, replacing the inland rail data previously included. The 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 ticked upwards slightly, 0.1% lower than the value four weeks prior.
Please direct questions about the Flexport Logistics Pressure Matrix to firstname.lastname@example.org.
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.