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Supply-Chain Relief Starts Debate Over Degree of Softening US Economy

Certain supply issues within the US are beginning to ease two years after a surge in demand triggered shelves to be empty, slowing shipping and sowing the seeds for soaring inflation.

The line of 25 cargo ships heading to the two major ports in Southern California is less than a quarter of the record back up in January. In addition, spot container rates have dropped nearly 20% this year, according to a report.

Flexport Inc.’s average transpacific shipping voyage of 102 days is the fastest since November. Containers are delayed in getting out of rail depots located in Detroit and Memphis are lower than in September, according to Hapag-Lloyd AG.

But for every sign that a cooling economy will give supply chains room to rebalance, there’s a reason for skepticism. On the East Coast, ship bottlenecks are resurfacing. The dwell time for containers is increasing in rail yards close to Chicago and Kansas City.

At 9.6 days in April, the waiting time for rail freight to be moved from the ports adjacent to Los Angeles and Long Beach was the longest since July.

The muddled picture is creating a divide among viewers. Some believe that the logistics connections between consumers and factories will be stretched further as China lets factories run fully.

Others see a slowing down in the consumer demand for goods because inflation reduces purchasing power, and spending on services rises.

Howe Wallace is in another group of people who have stopped trying to guess.

“I’ve stopped just speculating what’s going to happen for the next year,” said Wallace, chairman and CEO of Bartow, Florida-based PalletOne Inc., a large producer of wooden pallets. He said business is “still fairly strong” but the next several months are “too uncertain to call.”

Watching the pallet market is one way to track the economy’s subterranean strength. Here are a few obscure gauges from the supply-chain world that give clues about the degree of the slowdown ahead:

Product Packaging

An oft-forgotten bellwether of activity is the demand for product packaging — corrugated boxes. According to a Bloomberg Green Markets survey that’s yielded data for the past nine months, the sentiment of packaging producers has recently gone negative after staying mostly strong for the past two years.

Through the pandemic, the demand for box packaging was so strong that the time from order to delivery peaked at 22 days in February. With order backlogs shrinking, the lead time shrank by three days last month to 14, and industry participants believe it could fall below 10 days by July, according to Bloomberg Intelligence analyst Ryan Fox.

Inside the Box

Falling lead times for corrugated boxes signal a softening US economy

Experienced managers in the industry see corrugated packaging as the proverbial canary in the coal mine, but one that might not be flat-lining just yet.

“They believe that packaging is a leading indicator to the economy since so many products are shipped in boxes,” Fox said. “And yet some see the dip in demand as needed respite. They’ve been killing themselves for the last two years so the return to normal is welcomed.”

Flatbed Trucks

Another real-time pulse of physical commerce is the prevailing rate to move goods on flatbed trucks excluding fuel surcharges, which is only down about 3% from the peak reached a year ago, according to Bloomberg Intelligence senior logistics analyst Lee Klaskow. These rates are still almost 57% higher than they were in May 2019.

Flatbed trucks move a lot of heavy machinery, industrial components, and homebuilding materials.

Big Wheels Rollin’

US flatbed truck rates excluding fuel surcharges jumped in the pandemic

“Things are moderating but will remain better than before the pandemic,” Klaskow said. 

Some smaller truck carriers that entered the market recently and now face crippling diesel costs will be forced out of business in a spot freight-market correction, though the contract market has held up much better, Klaskow said. Contractual rates for flatbed trucking excluding fuel surcharges were up 3.7% in April compared with a 13.1% increase in April 2020, he added.

This article originally appeared on Bloomberg.


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Hi, you might find this article from Modern Campground interesting: Supply-Chain Relief Starts Debate Over Degree of Softening US Economy! This is the link: https://moderncampground.com/usa/supply-chain-relief-starts-debate-over-degree-of-softening-us-economy/