Robert Sutton, Executive Vice President of Innovation, examines economic activity for Q1 2021 and projected supply chain trends affected by current inventory levels.
U.S. CONSUMERS ARE OPTIMISTIC ABOUT ECONOMIC GROWTH
Purchasing Manager’s Index (PMI) is 58.6 for the month, second highest level since April of last year. Industrial production is at 104.6% overall. Mining and manufacturing output is down slightly over the previous month with harsh winter weather affecting refinery operations in the gulf. Output from the utilities sector is up.
U.S. unemployment is 6.2%, a slight decrease compared to February. Consumer sentiment for March is 83, up over last month while retail sales down 3%, down from last month. January sales figures revised higher, under-scoring the correlation between federal stimulus and retail sales.
Durable goods orders – excluding transportation – is +3.4%, the ninth consecutive month of growth, and orders of non-defense capital goods –excluding aircraft – is +6.5%. As manufacturing continues to grow, more manufacturing jobs are projected for 2021.
INDUSTRY UTILIZATION AND PRICES ALONG WITH CAPACITY CONTINUES MONTHLY TRENDS
Logistics Management Index (LMI) for February is 71.4%. Growth in inventory levels and cost, warehousing utilization and prices, and transportation utilization and prices have increased, while warehousing capacity and transportation capacity has decreased month-over-month.
Cass Freight Index is 1.11 for the month, indicating capacity for the first half of 2021 will remain tight. Tender rejections for contracted loads are at approximately 25% across the U.S. DAT load-to-truck ratio is up overall, with van +7.54%, and flatbed +62.2% month-over-month. DAT spot rates month-over-month shows van at $2.40, and flatbed and $2.56.
March imports volume from Southeast Asia remain elevated. Manufacturers shutting down at the beginning of the pandemic paired with increased sales and record low inventory levels in the second half of last year have affected the flow of goods into the U.S. West coast and east coast ports remain congested as a result, greatly impacting U.S. supply chain.
PROJECTED 2021 ECONOMIC ACTIVITY
The passing and distribution of the $1.9 trillion American Rescue Plan, with 25% as a direct payment to consumers, is expected to boost to economic activity and put further strain on already extremely low inventory levels. As manufacturers push to replenish the supply chain and bring inventory levels back in line with historic levels, there will continue to be increased pressure on capacity and rates in all modes of transport. Unemployment is expected to continue to decline as vaccination rates climb and states reopen which is expected to further stimulate growth.