In February 2004, Reed Research Group surveyed Logistics Managers in an effort to investigate spending and overall market trends in the logistics industry. The study was conducted via the Internet. An email containing a link to the survey was sent to 10,000 subscribers of Logistics Management. Entry into a drawing for a $100 American Express gift certificate was offered as an incentive. In total, 200 completed responses were received.

By Transportation Mode

	Increase	Decrease	Stay The Same
Truckload	34%	17%	49%
LTL	35%	22%	43%
Rail	9%	15%	77%
Ocean	22%	13%	66%
Air	26%	18%	56%
Package	36%	16%	48%

NEWTON, Mass. - Since mid-2003, logistics activity has increased even faster than the expanding economy since, historically, the early part of an economic recovery tends to tilt towards goods and away from services in the mix of business and consumer spending. "Goods" GDP has increased at a 9-percent annual pace in the U.S. in the last two quarters-50-percent faster than the overall 6-percent growth pace for the economy. Again, this is due to the fact that early economic recovery is the peak growth period for both consumer durable goods and capital equipment.

U.S. GDP growth will subside to an average 4.0-4.5-percent pace through next year with growth in logistics activity gradually falling to the same rate by late next year.  Worldwide, the economic growth rate has increased 2 percentage points since last summer. It is now 4 percent plus in the NAFTA region, near 6 percent in Asia, and almost 2 percent in Europe. This growth pace will continue through next year in NAFTA and Asia but accelerate to near 3 percent next year in Europe where an overvalued Euro has delayed economic recovery.

Inevitably, supply conditions will become less favorable for logistics buyers. So far,  steep price rises and availability problems have occurred only for ocean freight-caused by rising Chinese trade. Prices for other freight modes, including package, increased only 2.5-percent over the course of 2003 but larger rate increases are expected soon. The winter rate increases that you're already paying are largely energy driven and will partially retreat through the summer only to be replaced by the first of the significant capacity shortage rate increases.

All of the key freight rate drivers are unfavorable. Motor freight rates could average as much as 5 percent higher in 2004. Carriers have been reducing their stock of equipment for several years so capacity constraints will appear first in trucking. These equipment costs have been raised by tighter pollution emission rules and their labor costs has just been raised due to new hours of services rules for drivers. Fuel costs have been boosted in the last few months by a cold winter-diesel fuel diverted to home heating-and by OPEC's effort to restrict oil suppliers to offset unexpectedly low prices during the recession.

There is enough slack in the U.S., Canadian, and European economics to prevent widespread logistics prices spikes or availability problems for more than a year.  However, the capacity to absorb rapid growth in logistics activity is considerably less in Asia. To view the complete report, including data on availability of services, overall business expectations, and capacity utilization expectations, click here