The pipes within the flow of trade are interdependent and are powered by the consumer. While there are many different ways to analyze the flow of trade by reviewing the movement of drayage, port productivity and warehouse inventories, there is one public trade data point the world should be keeping an eye on for any signs of a consumer uptick.
I am talking about ocean freight bookings.
This section of the trade pipe depends on manufacturing orders, which is private information. Manufacturing orders are fueled by the consumer and inventories. The more manufacturing orders submitted, the larger the ocean freight booking.
As of now, ocean freight bookings are a fraction of what they were just seven months ago because of the pullback of the consumer and the bloated inventories.
Once we start to see a pickup in ocean bookings, that’s the signal manufacturing orders are increasing.
Unfortunately, while this correlation may be a no-brainer for many in the logistics industry, this data point is often overlooked in the mainstream. Why? Because it’s not as sexy as ocean freight rates. I understand why, but ocean freight rates are dependent on ocean bookings and are a lagging indicator in this area.
Ocean freight bookings are also a great gauge of how much the trucks and rails will be moving.
Since logistics providers get paid by the amount of freight they move, looking at the ocean bookings provides unique insight into volumes that will be moved. It’s actionable information for their investors.
While we don’t expect a pop in ocean freight orders over the near term, logistics managers tell me they do expect an uptick in orders around the mid to late second quarter. But for those who do not have that level of insight into the manufacturing pipe of the supply chain, ocean freight bookings are the next best data point to watch.
Remember, there’s no need to wait for a company to report its fiscal quarter results. That is backward, stale information. The pipes within the flow of trade tell all in real time.
