Positive Indicators and Strategic Measures for the Upcoming Holiday Season
As the months tick away for 2023, businesses are taking stock of global economic conditions, the state of the logistics industry, and supply chain conditions. What’s the status this month, and what can we expect moving into the peak, end-of-year period for holiday shipments?
Of course, there’s no way to predict the exact outcome, because depending on how you balance the short-term and long-term, the myriad and contradicting indicators are a bit more positive than what many economists projected earlier in the year.
On the one hand, you can make case that based on what the Federal Reserve is saying, the U.S. economy is healthy. And it is, by many counts. Or you can track what’s happening in our business specifically, like Craig Fuller does as CEO of FreightWaves, a price-reporting agency focused on the global freight market. He will tell you the overriding theme to the freight market and the overall economy right now is a downcycle – and more than any other moment in time, it is hard to comprehend and draw conclusions where we are going next.
I full-throatedly agree. As you know, we tend to refer to market conditions through rates, and while rates are impacted by many forces, what’s hurting 3PL service providers right now is overcapacity.
In the airfreight market, overcapacity equals lower rates. So will experience greater volumes? The answer is yes, but not necessarily translate in rates at the levels we saw last year.
Long term outlook?
Bolstering our confidence of an ultimate recovery is the fact that the Prime Group of companies are seeing businesses expand in many worldwide markets, reflecting what Benchmark International recently synopsized in its “Global Logistics 2023 Industry Report.” This global M&A firm now projects the global freight and logistics market to grow to $18.69 billion by 2026 at a compound annual growth rate (CAGR) of 4.4 percent.
When looking solely at logistics, the market is expected to reach $6.55 trillion by 2027, growing at a CAGR of 4.7 percent between 2022 and 2027. The report also says that the Asia-Pacific region is the largest in the freight and logistics market, with North America looking to be the fastest-growing region between now and 2027.
“Many economic analysts are increasingly optimistic about the economy because some inflation data has improved and key economic data points like GDP growth, consumer spending, and job creation have been stronger than expected,” the report explains.
In late July 2023, the U.S. Federal Reserve, citing elevated inflation, hiked the target range for the federal funds rate to as much as 5.5 percent. The nation’s central bank also acknowledged that U.S. economic activity has been expanding at a moderate pace, job gains have been robust in recent months, the unemployment rate has remained low, and the U.S. banking system is sound and resilient.
So, can it be best of time and the worst of time all at once? The answer is in the eye of the beholder.
At both Prime Logistics and Prime Fresh Handling, we’re doing our part to smooth supply chain issues by integrating new technology, developing a more diverse portfolio of vendors, adding more close-to-home logistics solutions for customers, enhancing our forecasting, and proactively communicating with customers. We know that safe, smart supply chain access and on-time delivery of your goods to market is paramount for your business.
Advance planning remains critical too. As we enter this lead-up period to the 2023 holiday shopping season, the time is now – in September and October – for our customers to be solidifying shipping preparations for holiday season goods. As we await further progress on the global economic front, let’s get moving to ensure that this year’s peak season sales have every opportunity for success – and good bottom-line performance for your business.
What’s good for your business is good for ours. We are in this together.
~Roger Paredes
CEO Prime Group