Logistics Indicator Points to Recovery of the Logistics Industry

The logistics indicator, collected by the ifo Institute on behalf of the Federal Association of Logistics e.V. (BVL), has shown a continuous recovery since April. Logistics service providers and the logistics industry are cautiously optimistic, even though the current situation is far from satisfactory.

(Berlin) The business climate of the German logistics industry has been continuously recovering since the Corona low in April. The indicator stood at 94.8 points in August, slightly higher than the previous month (92.7) – marking the fourth consecutive improvement in the business climate. This is evident from the monthly surveys on the logistics indicator conducted by the ifo Institute on behalf of the Federal Association of Logistics e.V. (BVL) as part of its economic surveys. Optimism is returning to the logistics industry – positive business expectations outweighed again in the second quarter. Although the surveyed companies still predominantly rated the business situation negatively, a steady improvement is also being observed here.

Logistics service providers reported a declining demand and expressed dissatisfaction with their order volumes. However, a smaller proportion of companies classified the business situation as unfavorable. Nevertheless, they looked forward to developments in the coming months with confidence. The business climate indicator improved in the negative range.

Predominantly Optimistic Future Perspectives

Also in the area of logistics users from trade and industry, optimistic future perspectives predominated. Although the business situation was also rated negatively in August, it has improved significantly over the past three months. The business climate improved again – but remained in the negative range in August. The indicator value reached 99.3 points, nearly returning to the pre-crisis level (February: 101.2 points).

The Corona pandemic and the containment measures have plunged the German economy into the deepest recession in its post-war history. The gross domestic product shrank by 2.0% in the first quarter of 2020 and by another 9.7% in the second quarter. As a result of the significantly declining new infection numbers, the shutdown measures have now been relaxed or completely lifted for some sectors of the economy. It is now certain that the economic downturn has been halted and the recovery of economic activity has begun. However, there is great uncertainty about the pace and duration of the recovery. This uncertainty stems from the further course of infections and the associated government containment measures, as well as the speed at which demand for goods and services picks up again.

Permanent changes in consumer and business behavior also play a role. Many providers of the affected services are likely to face structural adjustments that will likely lead to a noticeable increase in corporate insolvencies. Overall, however, the mood among German companies has improved significantly since its low point in April.

Many Areas at Pre-Crisis Level

In many sectors of the economy, the business climate is already close to pre-crisis levels again. The export-oriented manufacturing sector is also likely to gradually benefit from the improving economic situation in the key recipient countries. This is indicated, among other things, by the strong recovery in the ifo export expectations. Not least due to the low production of goods and services during the shutdown, the growth rates of the gross domestic product in the third and fourth quarters are expected to be strong. Nevertheless, the economic output is expected to be about 5% lower on average this year than in 2019.

The Corona crisis has also left deep scars on the labor market. The number of unemployed persons rose to 2.94 million by June, seasonally adjusted, the highest level since the Euro crisis. Since then, unemployment has only been declining slowly. However, the ifo employment barometer indicates that the decline is likely to accelerate somewhat in the coming months. Especially in the service sector and construction, more hiring is expected in August for the first time. The number of short-time workers, which according to official figures was nearly 6 million employees in April, is also decreasing only slowly. According to the latest results from ifo economic surveys, 37% of the surveyed companies were still using short-time work in August; this figure was 50% in April.

The Logistics Indicator

The logistics indicator is calculated by the ifo Institute on behalf of the Federal Association of Logistics e.V. It is based on monthly economic surveys from 2005 onwards. To determine the indicator, more than 4,000 responses from logistics service providers (60% freight transport (excluding air freight); 40% forwarding and logistics) and from companies in the manufacturing sector (66%) and trade (wholesale: 17%; retail: 17%) as users of logistics services are used. The overall indicator is calculated equally from the results of providers and users. The question design aims to assess the current business situation, developments in recent months, and expectations for the coming months. Typically, survey participants have three response options for each question, which can be classified as positive-expansive, average-neutral, and negative-contractive. A balance is formed from the percentage shares of positive-expansive and negative-contractive responses. Accordingly, the balance can take values between -100 (all companies gave a negative-contractive response) and +100 (all companies gave a positive-expansive response). With a balance value of 0, negative and positive responses are balanced. All questions relate to a seasonally typical assessment. Additionally, all reported figures are adjusted for seasonal patterns using a statistical standard procedure (X13-ARIMA-SEATS). To calculate the index values of the business climate and the two components business situation and expectations, the balances are each increased by 200 and normalized to the average of a base year (currently 2005).

With Confidence Towards the German Logistics Congress

Comment by Prof. Thomas Wimmer, Chairman of the Board, Federal Association of Logistics (BVL):

“What comes next? Are we experiencing a V, a U, a W, or even an L in terms of the economy? The logistics indicator based on the August 2020 survey suggests that it is likely to be a V-shaped economic trend. Because there is much to suggest that the logistics sector is experiencing a rapid recovery, just a few months after the steep economic decline due to the Corona lockdown and the massive disruption of international supply chains. Currently, all indicator values are pointing upwards: the business situation, the expectations, and the climate value overall.

The Federal Ministry of Economics expects in its forecast from early September that the entire German economy will shrink by 5.8 percent this year and then grow by 4.4 percent in 2021.

Federal Minister of Economics Peter Altmaier presented the V-shaped curve and stated that the bottom has been reached. Yes, the economy as a whole – and thus also logistics – has entered the recovery phase in the third quarter. The economic and social packages that the government has quickly implemented are taking effect, even if the old momentum has not yet been regained. Nevertheless, many uncertainties remain.

The V-shaped economic trend is good news. But it does not mean: we can close the book on the Corona crisis and return to the structures, processes, and methods of the past. Instead, it means: addressing weaknesses that have become visible due to the crisis, putting the efficiency paradigm to the test, striving for resilient solutions, and optimizing the economic, social, and ecological dimensions of logistics actions in balance with each other.

Furthermore, it remains to be seen how the framework conditions for logistics actions will change. We still do not have answers to many questions regarding future mobility of goods and services, global interconnections, developments in export and import markets, or the permanent shrinkage of entire sectors such as air travel and cruise tourism. We do not know whether people will permanently change their consumption behavior. What will the customer expect post-Corona? What price will they be willing to pay?”

Agenda German Logistics Congress

Many of these questions are on the agenda of the German Logistics Congress 2020, which will take place from October 21 to 23 under Corona-compliant conditions as a physical event in Berlin. Many of the contents will also be available online as digital offerings and can be booked separately. In this way, the BVL is sending a signal of confidence – and bringing people in logistics and supply chain management back together for discussions and exchanges about meaningful, promising paths into the future.

Graphic: © BVL

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