With 2021 right around the corner, most shippers are still fully-engaged in trying to finish out 2020’s shipping needs as efficiently and cost-effectively as possible. Everyone has done the best they can weathering the freight storm of 2020, but many are wondering if 2021 will bring that much relief or be as volatile as the past 10 months. We at M&A don’t have a crystal ball telling us exactly what 2021 will bring, but we do have a fair forecast of what to look out for in the next year.
Beyond almost every prediction, COVID cases continue to rise as we enter late November, further hindering the economic recovery and reprieve that the logistics industry desperately needs. Even though the economy is trending upward, most companies are still reeling from supply chain disruptions. The coming of Peak Season likely brings a demand increase as much as 50% compared to 2019, which will result in increased rates and transit.
The possible end of the extended unemployment insurance program next week, COVID-19 outbreaks in many states, uncertainty in consumer demand, and rising retail warehouse inventories make current truckload industry predictions a little cloudy. Some factors such as several recent data points suggesting inventories are rising faster than sales lead us to believe not all is well, but could be looking up. The latest Logistics Managers Index showed June inventory levels jumped up by 7.6% month-over-month after being relatively flat for all of March, April, and May. Warehouse capacity has been contracting for four consecutive months, with the largest decrease in June dropping by a further 6% to its lowest level since the index began in early 2018. The latest manufacturing and sales inventory report published last week by the Census Bureau showed that the inventory-to-sales ratio improved slightly to 1.51 in May from 1.67 in April which is a step in the right direction. From a freight recovery perspective, high inventory-to-sales ratios will eventually translate to lower truckload volumes.