Supply Chain Managers to Remain Prudent, Say Economists

While ISM noted that economic activity in the sector had expanded for 34 straight months prior to contraction in June 2012, IHS Global Insight economists are more circumspect.
By Patrick Burnson, Executive Editor
May 02, 2013 - SCMR Editorial

Shippers may have been cheered by last month’s manufacturing report issued from the Institute for Supply Management, but other key indicators suggest caution.

While ISM noted that economic activity in the sector had expanded for 34 straight months prior to contraction in June 2012, IHS Global Insight economists are more circumspect.

Productivity has been subdued recently after surging in the wake of the Great Recession, when firms slashed payrolls and squeezed more from their existing workforces.

IHS Global Insight US Economist Erik Johnson told SCMR that he does not expect supply chain managers to invest “sharply” in new technologies, either.

“Don’t count on gains in this area,” he said. “But at the same time, we don’t see managers making significant workforce reductions.”

Spikes in productivity are expected following recessions, says IHS, but they aren’t typically followed by extended periods of muted productivity growth. During the 14 quarters since the economy emerged from the recession, productivity has been growing at a 1.5% annual rate. This is the slowest rate among the nine postwar expansions that have lasted that long.

Finally, IHS forecasts that output growth should decline in the second quarter as the sequester kicks in.

Economists there don’t expect the labor market to “fall off the cliff,” and say shippers may therefore see another weak productivity reading in the second quarter. But the underlying fundamentals in the economy are trending upward, and 2013’s employment growth should be in line with 2012’s.



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The value of exports from America’s Foreign-Trade Zones increased by 13.7 percent in 2013, to a record-high 79.5 billion in merchandise exported, according to figures released by the U.S. Foreign-Trade Zones Board in its Annual Report to Congress.

While summer may be nearing its end, the climate in the manufacturing sector remains very warm, according to the most recent edition of the Manufacturing Report on Business issued today by the Institute for Supply Management.

When publicly-traded Class I freight railroad and intermodal service providers issued second quarter earnings results earlier this summer, the topic of less than ideal service on the rails was a common theme within the earnings releases and question and answer sessions with top management at those companies.

Supply chain security provider Freightwatch International has released its semi-annual report on cargo theft in the Asia Pacific region for the first half of 2014, which contains some heartening news for U.S. shippers reliant on trucking, warehousing and retail.

FedEx Ground, a subsidiary of FedEx Corporation, reports today that a decision by a three-judge panel of the United States Court of Appeals for the Ninth Circuit reversed previous rulings by the District Court for the Northern District of Indiana in three class action cases involving mostly former independent contractors for FedEx Ground

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.