2024 Supply Chain Economic Update

January 30, 2024

Understanding the underlying data and their trends can influence how you run your business, shaping your success in these volatile, uncertain, complex, and ambiguous (VUCA) times. It helps monitor important economic and supply chain signs when things are uncertain. Doing this can give you an edge over your competitors when looking at the 2024 supply chain landscape.

Regular monitoring of key economic and logistics indicators provides direction. They’ll help navigate your business through today’s VUCA.

With that follows our quarterly update on key strategic economic and logistics indicators.

First, we cover macroeconomic indicators and a supply chain pressure index to get a big-picture snapshot. Then, we get more specific and examine logistics measures captured by the Logistics Managers’ Index (LMI).

We’ll start with the key macroeconomic indicators.

Key Economic Indicator #1: Gross Domestic Product (GDP)

The Bureau of Economic Analysis (BEA) reported that the annual US GDP rate increased in December 2023. The fourth quarter recorded an increase of 3.3 percent. In the third quarter, real GDP increased 4.9 percent.

That shows a decline in GDP from the prior quarter. However, the BEA advised this estimate was based on incomplete data. Hence, the BEA expects to release a revised estimate based on more complete data. NLT February 28, 2024.

That reflects an increase of 0.4% from August’s data and 6.9% from the year-over-year data. Consumer spending, business investment, and exports contributed to the increase in GDP. The annual GDP growth rate was 2.5 percent, led by consumer spending.

Another powerful sign was inflation, which declined more than expected. It came in at less than 2 percent, below the Fed's guideline.

Combined, these indicators suggest the economy is strengthening but growing slower. Overall, the economy is doing well. (Data is as of January 25, 2024.) Next, we’ll look at the Consumer Price Index.

Key Economic Indicator #2: Consumer Price Index or Inflation

The CPI measures the average price change urban consumers pay for a market basket of goods and services. (Data is as of January 11, 2024.)

December’s Consumer Price Index (CPI)

The BEA reported the CPI increased 0.3 percent in December. That represents an uptick from November’s rise of  0.1 percent. On an annual basis, the all-items index rose 3.4 percent before seasonal adjustment. You can access detailed CPI data here.

Key Economic Indicator #3: Recession–Business Cycle Contraction

As of December 2023, the Wall Street Journal reported that a soft landing was in the making. Based on a survey of economists, the WSJ reported expectations of recession had dropped markedly.

In line with that, the WSJ projected that the 2024 supply chain would likely maintain last year’s expansion but at a slower rate.

The main line is that a recession is not likely. Rajeev Dhawan, an economist at Georgia State University, described the current environment as “… less (of) a recession and more of a growth stop”. (Information is as of January 25, 2024.)

That brings us to our next indicator: national employment.

Key Economic Indicator #4: Employment or the National Employment Report

The ADP National Employment Report is a monthly economic data released by Automatic Data Processing (ADP). ADP is a leading payroll services company. The ADP National Employment Report helps to unpack the health and direction of the U.S. labor market. Its report provides up-to-date employment statistics, analysis, and trends.

December’s ADP National Employment Report showed that private businesses increased private employment by 164,000 jobs. Job gains came from an increase in the leisure and hospitality industry. Job gains increased across the board from small- to large businesses. It appears the job market is returning to its pre-pandemic levels. (Data is as of December 2023.)

With that, let’s turn to and analyze PMI-Manufacturing.

Key Economic Indicator #5: PMI-Manufacturing

The S&P Global US Manufacturing PMI for December 2023 decreased to 47.9 from November’s reading of 49.4. That’s a decrease of 1.5, the fastest rate since June 2023. This means the economy slowed down at the end of the year. (Data is as of January 2, 2024.)

In late January, prices experienced a slower growth rate based on the S&P Global Flash estimate.

Here are S&P’s key findings:

  • Flash US PMI Composite Output Index. Came in at 52.3—up from 50.9 in December; this reflects a 7-month high.
  • Flash US Services Business Activity Index. This indicator also flashed a 7-month high at 52.9 up from 51.4 in December.
  • Flash US Manufacturing Output Index. This indicator came in at 48.7, up slightly from 48.1 in December. This reflects a 2-month high.
  • Flash US Manufacturing PMI. This flash metric registered at 50.3 in January at 47.9, up from 47.9 in December. This was a 15-month high.

The flash PMI results signal a change from PMI-Manufacturing last month. The most current data show growth picking up. This was the highest increase over the past seven months.

That concludes our review of our key macroeconomic indicators. Now, we’ll analyze our supply chain and logistics indicators.

2024 Supply Chain and Logistics Indicators

Global Supply Pressure Chain Index (GSCPI)

The Global Supply Chain Pressure Index (GSCPI) is a new measurement. The Federal Reserve Bank of New York created GSCPI to measure global supply chain conditions. It assesses supply chain conditions by integrating transportation costs and manufacturing.

The GSCPI combines variables from several indices in transportation and manufacturing. This helps to provide a comprehensive summary of potential supply chain disruptions.

Last month, the GSCPI fell to -0.15 in December. That declined from 0.13 in November (adjusted from an initial reading of 0.11). GSCPI readings measure standard deviations from the index’s historical average. (Data is as of Dec 23.)

Next, we’ll review logistics-specific indicators reported in the LMI Index.

Logistics Manager's Index (LMI).

“The Logistics Manager's Index (LMI) is a monthly indicator of the health of the US logistics industry. It is calculated by the Council of Supply Chain Management Professionals (CSCMP) and is based on a survey of logistics professionals. The LMI is a leading indicator of economic activity, and it is often used to predict future changes in the US economy.”

Here’s the current status as of December, starting with the aggregate measure.

In December 2023, the LMI was at 50.6. That reflects a slight increase of 1.2 from November’s reading of 49.4. Although this has improved since last month, it suggests slow growth, not no growth.

Inventory Status: This measure is mixed. Inventory levels are contracting, but costs showing no change. Inventory levels remained the same at 44.3.

Warehousing Status: Warehousing is expanding in all three measured categories: capacity, utilization, and process.

Transportation Status: Transportation is expanding in two areas: capacity and utilization. Pricing, meanwhile, is contracting. Prices increased 6.3 from 55.8 to 62.1.

Let’s analyze what these changes mean for inventory, warehousing, and transportation.

  • The logistics industry is expanding, but at a slower rate than in previous months.
  • Inventory levels are decreasing, and inventory costs are holding.
  • Warehousing capacity is increasing at a faster rate than in previous months. December’s rate was 55.1, showing increased capacity from November’s higher capacity rate of 60.6.
  • Warehousing utilization and prices are increasing. The rates for December over November were 7.4 and 1.2, respectively.
  • Transportation capacity and utilization are increasing, while transportation prices are decreasing. Capacity increased by 1.4. Utilization increased by 4.6. And prices declined by 1.1, from 44.2 to 43.1.

The overall expansion of the logistics industry is positive news for the economy. It indicates that the economy is growing, albeit slowly, and that businesses are doing well. Future growth estimates denote expansion up to 59.9 from November’s projection of 57.4

The logistics industry is transforming. That adds elements of  VUCA. To survive, you must address these challenges.

That said, the economy seems to be on a strong footing as it recovers from the pandemic. These economic and logistics indicators reflect an improving business environment.

Analyzing data from year-to-year and month-to-month provides meaningful context. That informed context enables us to refine our forecasts and better prepare by optimizing supply chains in 2024.

And that allows you to operate in challenging times with confidence. In turn, this will lead to better results, giving you a competitive edge.

Your partner in navigating the 2024 supply chain

At American Global Logistics (AGL), we monitor what’s happening in the economy. That’s because the economy seems to play an outsized role in global supply chains.

Our data-driven approach keeps our customers informed about upcoming developments. This proactive strategy allows us to mitigate risks instead of reacting to events.

As a future-oriented 3PL, we rely on data to guide our strategy. Even if mixed, detailed data is far better than no data. Using our data-driven approach, we can transform VUCA into an advantage for you.

Contact AGL if you want to move your business ahead with data-based decisions.

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