Pessimistic outlook for US logistics epitomises global sector

The United States is supposed to be the one major economy that is showing signs of sustained and accelerating economic growth, but according to the most recent ‘State of Logistics’ report, published by the American Council of Supply Chain Professionals and Penske, things remain almost as depressed as they have been over the past four years.

The conclusions of the report, which is an annual survey of economic activity in the logistics sector in the US, are remarkable for their gloom. What the report calls “the new normal”  is characterised by “slow growth with GDP growth hovering between 2.5 to 4%” leading to “less reliable or predictable freight service as volumes rise, but capacity does not increase fast enough to fully meet demand; and longer shipping times for commodities moving by ocean.”

Rosalyn Wilson, who writes the report annually, summarises the condition of the US logistics sector as “truck capacity is still walking a fine line, with few shortages, but industry-high utilization rates…..ocean carriers continue to manage their excess capacity, while battling unfavourable load factors and downward rate pressure. Despite reductions in the number of cargo aircraft, the air cargo industry is still battling overcapacity, made worse by the increased availability of cargo space in the bellies of passenger jets. The railroads still have more than 20% of their freight cars in storage.” What is slight disturbing is that much of the world’s logistics sector could be described in this way.

The report, regarded as an accurate insight into the region’s logistics market, offered new analysis this year with interesting comparisons of logistics costs between different regions, comparisons which appear to give the US a lower cost base than other major economies. Over 2012, this cost of logistics remained stable at 8.5%.

However, it is the implicit pessimism that runs through the report that is so striking. Rosalyn Wilson does not expect the world’s economy to “support a robust outlook” as “new orders and backlogs are down, manufacturing is falling, and GDP outlooks are being downgraded. Record high inventories could become a drag on the economy if we do not start drawing them down.” Indeed, her message is that this situation could continue for “many years” in the American economy at least and possibly for much of the rest of the world as well.