Discover the latest insights from a recent supply chain report highlighting transportation trends in February. Despite a second consecutive month of price growth, the transportation industry faces a landscape where capacity is expanding at a faster rate, suggesting a transition phase rather than a full recovery.

Transportation Prices Rise in February, but Capacity Grows Faster

The transportation industry saw a second consecutive month of growth in prices during February, according to a recent supply chain report. However, the rate of growth in transportation capacity was higher, indicating that a meaningful recovery in the freight cycle is not yet underway.

Transportation Prices

The sub index for transportation prices increased 1.8 percentage points to 57.6 in February, indicating expansion in the sector. This follows a period of contraction that lasted from July 2022 to December 2022.

Upstream firms, such as wholesalers and manufacturers, reported stronger price increases than downstream firms, such as retailers. The overall transportation pricing subindex slowed slightly in the latter half of February, registering a 52.4 compared to 62 in the first two weeks of the month.

Transportation Capacity

Transportation capacity expanded further in February, with the subindex rising 6.4 points to 60.9. Utilization also increased by 1.5 points to 56.5.

The report suggests that the growth rate in capacity outpacing the growth rate in pricing indicates that the freight market has not yet entered a true growth period. However, an inflection point may be on the horizon.

Outlook

Survey respondents expressed a slightly positive outlook for transportation capacity one year from now, with a reading of 50.5. The outlook for prices was more pronounced, with a reading of 77.1. This suggests that respondents expect prices to continue to rise in the coming year.

Inventory Levels

Inventory levels also increased in February, with the subindex rising 5.7 points to 58.5. This indicates that firms are restocking after running down inventories over the holidays. Upstream companies reported stronger inventory growth than downstream companies. The outlook for inventories one year from now was 60.1, which was slightly lower than in January.

Conclusion

The transportation industry is experiencing a period of transition, with prices rising but capacity growing at a faster rate. While a meaningful recovery in the freight cycle is not yet underway, the outlook for the coming year is cautiously optimistic. Firms are restocking inventories, and respondents expect prices to continue to rise.