By Richie Lin.    Photo：Denniz Futalan

The Purchasing Managers' Index (PMI) is collected and announced monthly by the Institute for Supply Chain Management (ISM). The PMI is based on a monthly survey sent to senior executives of more than 400 companies in 19 primary industries, which have major contribution to U.S. GDP. The PMI is based on five critical survey areas: new orders, inventory levels, production, supplier deliveries, and employment. The ISM weighs each of these survey areas equally. The surveys include questions about business conditions and any changes, whether it be improving, no changes, or deteriorating. The PMI is usually a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A PMI number under 50 represents a contraction, and a number at 50 indicates no change. When we look at the PMI closely, we can see the downward trend of its numbers, which kept going down from 55.4 in April 2022 to 50.9 in September 2022. This downward trend shows that economy is still at expansion, but it is already close to the brink between expansion and contraction. This trend also represents many executives of industries treat the future of economy negatively because they don’t receive many new orders and their inventory level is way too high. In a news report this week, a CEO of bicycle manufacturer said the current inventory level of their customers are over 12 weeks, which is much higher than the safe inventory level of 2~3 weeks. In supply chain, people would talk about the Bullwhip effect. When the end customers order 10 pieces, different part of suppliers would need to order double, triple, or even multiple materials to prepare for the productions. Therefore, at the very top of supply chain, the inventory of materials might be extremely exaggerated. Since suppliers would prepare more for expecting orders, they will also over-reacted if they anticipate the orders will be less and less. This is why we saw the PMI has kept falling for months. High inflation restricted the buying power of consumers, then retailers will cut the orders for whole-sellers, then the orders for manufacturers, then the orders for suppliers. Everybody in supply chain is to stock resources for winter now, therefore there will be less and less international ocean freight and airfreight arrangements. Right now, the mood in the market is “running out before it’s too late”. It might take several months to settle down the panic, then the consumers will start to buy products when they can see the bright future of economy.

Ocean FCL market rate reference in week 43:

• Asia main ports to USAWC USD 2000~3500 per 40GP; 
• Asia main ports to USAEC USD 6000~7000 per 40GP; 
• Asia main ports for IPI points of USA is USD 6500~9000 per 40GP.
• Asia main ports to Europe base ports and West Mediterranean: USD 5000~6500 per 40GP.

Airfreight market rate in Week 43:

Airfreight rate might increase abruptly without further notice. The following market rate for your reference. 

• PVG/SZX/HKG/TPE to LAX USD 5.1/kg, 
• PVG/SZX/HKG/TPE to ORD USD 5.3/kg, 
• PVG/SZX/HKG/TPE to JFK USD 5.4/kg.

Appreciate if you could share TGL Blog among your friends who are interested in first-hand market information of supply chain and updated economic incidents.