Have you ever felt like you're navigating your business through a storm without a compass? Understanding data, trends, and economic indicators can influence how you run your business, shaping your success in these uncertain times.
The economy and supply chains are very unpredictable now. The only thing certain is uncertainty. But it would help if we could foresee problems before they happen.
The pandemic made the already uncertain economy and supply chains even more unpredictable. This pushed companies to transform, which added more uncertainty. And now we have the Israeli-Hamas conflict, further adding to market volatility.
When things are uncertain, it helps to monitor important economic and supply chain signs. Doing this can give you an edge over your competitors.
That’s why it’s important to steer your business on a steady course. Routine monitoring of key economic and logistics indicators works like a compass. They’ll help steer your business through uncertainty.
With that follows our quarterly update on key strategic economic and logistics indicators.
These indicators provide insights into how the economy is doing. Supplementing that is the monthly Logistics Managers’ Index (LMI). This report has logistics-specific indicators critical to your business.
We’ll start with the key economic indicators. Then we’ll analyze the LMI index.
Key Economic Indicator #1: Gross Domestic Product (GDP)
The US GDP increased in September 2023 to $20.94 trillion. 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. (Data is as of 2 October 2023.)
Consumer spending, meanwhile, rose 0.6% in September. As a reminder of the weight of this indicator, consumer spending makes up about two-thirds of US economic activity. September’s performance was the briskest rate of growth since April 2023. Also, business investment increased 0.7% in September, and exports increased 1.2%.
Economists’ consensus is that the economy should continue growing. The data supports that consensus, albeit the data suggests the economy will grow at a slow pace. In particular, the pace of growth will likely slow down as the Federal Reserve raises interest rates to confront inflation.
That’s the national production outlook for September 2023. Now we’ll look into the prices of those goods and services captured in the GDP.
Key Economic Indicator #2: Consumer Price Index or Inflation
The CPI serves as a measure of the average change in prices paid by urban consumers for a market basket of goods and services. (Data is as of October 12, 2023.)
September’s Consumer Price Index (CPI) data for All Urban Consumers (CPI-U) rose 0.4% in September 2023, after increasing 0.6% in August. Over the last 12 months, the all-items index increased 3.7%. The index for shelter was the largest contributor to the monthly all-items increase, accounting for more than half of the increase.
Specifically, the index for all items less food and energy rose 0.3% in September, the same increase as in August. Indexes that increased in September include rent, owners' equivalent rent, lodging away from home, motor vehicle insurance, recreation, personal care, and new vehicles.
The CPI-U rose 0.4% in September 2023, after increasing 0.6% in August. Over the last 12 months, the all-items index increased 3.7%. The index for shelter was the largest contributor to the monthly all-items increase. That accounted for over half of the increase.
An increase in the gasoline index was also a major contributor to the all items monthly rise. September’s data showed mixed results for the major energy components. Overall, the energy index rose 1.5%.
The food index increased 0.2% in September, as it did in June and July 2023. The index for food at home increased 0.1% over the month, and the food away from home index rose 0.4%.
Next, the index for all items less food and energy rose 0.3% in September. That was the same increase as in August.
Indexes that increased in September include:
- Rent
- Owners' equivalent rent
- Lodging away from home
- Motor vehicle insurance
- Recreation
- Personal care
- New vehicles
The indexes for used cars and trucks and for apparel were among those that decreased in September.
The all-items index increased 3.7 percent for the 12 months ending September. That was the same increase as the 12 months ending in August. The all items−less food and energy−index rose 4.1 percent over the last 12 months.
The energy index decreased 0.5 percent for the year ending in September. And the food index increased 3.7 percent over the last year.
More simply, the prices of goods and services in the United States rose 0.4% in September, after rising 0.6% in August. Prices increased driven by higher prices for shelter, gasoline, and food. The increase in prices is putting pressure on household budgets. That covers the snapshot of rising prices and economic indicators.
Key Economic Indicator #3: Recession–Business Cycle Contraction
Now, let’s look at the prospect of a recession or a period of temporary economic decline. It results in negative growth that occurs in two consecutive quarters.
As of September 2023, the likelihood of a recession in the US economy was weakening. Many economists who had previously predicted a recession are now revising their forecasts. They cite the strength of the jobs market and the resilience of the economy for their revision. (Information is as of October 18, 2023.)
Goldman Sachs revised its prediction down to a 25% chance of a recession in the next 12 months. However, some economists caution the economy is losing steam. They refer to factors such as weaker business and slowing construction activity.
According to Moody’s Weekly Market Outlook, slow growth will prevail but fall short of dipping into a recession. GDP will likely remain in positive territory, but not by much. That said, risks abound. That means the economy is susceptible.
The bottom line is that a recession is not probable, but it is possible. That brings us to the next key economic indicator: national employment.
Key Economic Indicator #4: Employment or the National Employment Report
The ADP National Employment Report is a monthly economic data release by Automatic Data Processing (ADP), a leading payroll services company. The ADP National Employment Report is a crucial resource that provides up-to-date employment statistics, analysis, and trends to understand the health and direction of the U.S. labor market.
This report provides helpful insights into the levels of nonfarm private employment. The ADP Report previews the more detailed employment situation report issued by the Bureau of Labor Statistics.
Its comprehensive breakdowns and close alignment with official figures make it an essential tool for assessing employment conditions and making informed decisions.
According to September’s ADP National Employment Report, private businesses cut 83,000 jobs.
That is the highest number since February 2022. Those job losses came from large businesses. That reflects a decline of 50.56% from August and a 66.03% decline from last September. (Data is as of September 2023.)
Here’s where jobs declined by industry last month:
- Professional and business services cut jobs by 32,000.
- Trade, transportation, and utilities cut jobs by 13, 000.
- The manufacturing sector cut 12,000 jobs.
Small- and medium-sized businesses, on the other hand, showed job gains. That’s the national labor snapshot for June. With that, let’s turn to and analyze PMI-Manufacturing.
Key Economic Indicator #5: PMI-Manufacturing
The S&P Global US Manufacturing PMI for October 2023 increased to 49.8 from August’s reading of 47.9. That’s an increase of 1.9, putting the PMI ever so slightly below 50. This means the economy is neither growing nor declining. A score above 50 suggests a growing economy. Conversely, a score below 50 indicates declining manufacturing activity.
Let’s look behind September’s PMI number.
September’s slight improvement suggests the economy may trend towards growth. The manufacturing sector grew, with production increasing at the fastest pace since May. This was due in part to an increase in workforce numbers, as companies sought to increase capacity. (Data is as of October 2, 2023.)
However, some manufacturers also noted that demand conditions had improved, which had helped to support the expansion in output. That said, new orders fell for the fifth month in a row, but at a slower pace than in previous months.
Firms continued to report that high interest rates and inflation were squeezing customer spending, but some suggested that there were signs of a pickup in demand.
That wraps up our key economic indicators. Now we’ll look at a key supply chain indicator.
Key Supply Chain Indicator #6: Global Supply Pressure Chain Index (GSCPI)
The Global Supply Chain Pressure Index (GSCPI) is a new measurement. Created by the Federal Reserve Bank of New York, GSCPI seeks 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.
The GSCPI is a measure of how much prices have changed. The government calculates it based on a survey of prices paid by consumers. The GSCPI is a leading indicator of inflation, so it usually goes up before inflation goes up.
The GSCPI rose to -0.69 in September, so prices for goods and services in the United States rose 0.69% in September. This is good news for consumers because it means that their purchasing power is increasing. However, it is bad news for businesses because it means that their costs are increasing.
We will continue to track this indicator because it gives us valuable insights into global supply chains. Monitoring the GSCPI Index score can help you make well-informed decisions to adjust your strategies as needed. Adapting in this way can enhance your business's agility.
Now, we’ll narrow down our review of logistics-specific indicators.
Logistics Manager's Index (LMI)
What is the Logistics Manager's Index?
“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.”
Below is the status of September’s logistics and economic indicators, starting with the aggregate measure.
In September 2023, the LMI was at 52.4. That reflects a slight increase from August’s reading of 51.2. Although this has improved from last month, it still reflects substantial weakness compared to the all-time average of 62.9.
Warehousing Status: The three warehousing metrics (Warehousing Capacity, Warehousing Utilization, and Warehousing Prices) are the largest contributors to September's expansion. The rate of expansion has slowed for Warehousing Capacity. Meanwhile, the rates of expansion for Warehousing Utilization and Warehousing Prices have increased.
Transportation Status: Transportation Utilization has moved from no change to expansion, and the decline in Transportation Prices has slowed slightly.
Inventory Status: Conversely, there has been a slight increase in the contraction of Inventory Levels and Inventory Costs.
Let’s analyze what these changes mean.
The logistics industry is expanding but at a slower rate than in previous months.
The expansion of the logistics industry is being driven by the increasing demand for goods and services. The increasing demand is because of several factors, including the economic recovery, the holiday season, and the ongoing COVID-19 pandemic. Increasing demand is putting pressure on the logistics industry, as businesses struggle to meet the demand.
Warehousing capacity is increasing but at a slower rate than in previous months.
The slower rate of expansion in warehousing capacity is because businesses are struggling to find the space they need to store goods.
Warehousing utilization and warehousing prices are increasing.
The slower rate of expansion in warehousing utilization is because businesses cannot move goods as quickly as they would like.
Transportation utilization is increasing, and transportation prices are decreasing.
The increasing rates of expansion in warehousing prices and transportation prices are because businesses are paying more to store and transport goods.
Inventory levels are decreasing, and inventory costs are decreasing.
The decrease in inventory levels is because businesses are selling more goods than they are producing. The decrease in inventory costs is because businesses are paying less for goods.
The overall expansion of the logistics industry is positive news for the economy. It indicates that the economy is growing and that businesses are doing well.
Yet, the slower rate of expansion and the increasing costs are a cause for concern. Businesses need to meet the demand for goods and services, and they need to reduce their costs.
Conclusion
The world is changing a lot due in large part to the pandemic and now the Israel-Hamas conflict. The logistics industry is at a turning point. One thing that’s clear is the need to deal with uncertainty, especially as transformation adds to that uncertainty.
Understanding this complex situation is increasingly important as economic and logistics indicators show a challenging business environment. Looking at data from year-to-year and month-to-month provides context.
Tracking these indicators allows you to better anticipate the future. That allows you to navigate uncertainty with more confidence. And that will lead to better results.
Next Steps
At American Global Logistics (AGL), we don't wait for change; we anticipate it by uncovering economic indicators through data analysis. Taking a proactive approach, we always prepare our customers for what's on the horizon. That’s how we avoid the risks of a reactionary stance.
As a future-oriented 3PL, we use data to guide our strategy. We believe that having detailed
data, even if mixed, is far better than no data. By tracking these indicators, we can transform complexity into an advantage for you.
Contact AGL if you want to make data-based decisions to move your business ahead.