US Logistics Costs Spike, Home Sales Decline as Prices Rise, Economic Growth Slows
US Logistics Costs Spike
Total costs to store and transport U.S. goods soared more than 22% over the prior year in 2021, spurring the current wave of logistics onshoring and nearshoring aimed at insulating American companies from lingering snags in the global supply chain caused by the pandemic, according to a prominent trade group.
U.S. business logistics costs hit $1.85 trillion, rising 22.4% from 2020 and representing 8% of 2021’s $23 trillion in national gross domestic product, according to a report released Tuesday by the Council of Supply Chain Management Professionals. The annual report, gauging the overall health of the logistics system, was prepared by service provider Penske Logistics and consulting firm Kearney.
“Business inventories dropped to near historic lows, but the costs associated with storing, handling and financing these items rose considerably,” the report said. Inventory-carrying costs rose by nearly 26% from the prior year in 2021, while transportation costs increased nearly 22%, “leading to uneven supply chains and inconsistent product availability for consumers.”
The value of goods delivered through last-mile channels continues to trend up, with e-commerce sales growing 10% from the prior year in 2021 to reach $871 billion, accounting for 14% of all U.S. retail sales. Road freight accounted for the largest portion of supply chain spending, growing 23.4% to reach $831 billion.
U.S. companies increasingly are moving logistics operations to places either inside the U.S. or closer to the country, in response to lingering pandemic-related supply bottlenecks, especially in Asia and Europe.
While those relocations and new autonomous technologies have helped ease U.S. supply disruptions, the report said factors causing continued challenges in 2022 include shortages of parts, equipment and drivers, and most recently rising fuel prices.
Home Sales Decline as Prices Rise
Sales of existing single-family homes dropped for the fourth straight month in May, declining 3.4% from April and 8.6% from May 2021, the National Association of Realtors reported Tuesday.
Meanwhile, the median price for the 5.4 million U.S. homes that did sell in May was $407,600 — marking the first time the median topped $400,000 and representing a 14.8% rise from a year earlier. The trade group said the inventory of unsold existing homes rose 12.6% from the prior month to just under 1.2 million at the end of May, the equivalent of a still tight 2.6 months of inventory at the current monthly sales pace.
“Home sales have essentially returned to the levels seen in 2019 — prior to the pandemic — after two years of gangbuster performance,” Lawrence Yun, the group’s chief economist, said in a statement.
“Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions,” Yun said.
Single-family sales trends can have a big impact on demand for rental properties, since housing affordability in many regions is a key factor in consumers’ choice to stay in apartments. Yun said further single-family sales declines should be expected in coming months, given housing affordability challenges and this year’s sharp rise in mortgage rates.
Economic Growth Slows
The pace of U.S. economic growth slowed in May, according to a closely watched multifactor gauge by the Federal Reserve Bank of Chicago.
The National Activity Index declined to 0.01 from a revised 0.4 in April, the regional Fed reported Tuesday. Anything above zero points to growth based on several factors tracked in the composite gauge of 85 indicators including production, income, employment, personal consumption, housing and sales of goods and services.
The three-month moving average in the activity gauge slid to 0.27 in May, from 0.39 in April. Personal consumption and housing were among categories detracting from May’s figure, while employment boosted the activity gauge, the Chicago Fed reported.
Those numbers were released as the Federal Reserve Bank of Philadelphia Tuesday reported results of a nonmanufacturing business outlook survey, showing firms are anticipating growth in overall activity, including sales and employment, over the next six months despite rising costs.