After reaching its highest reading of 59.2 in September, the overall Stifel Logistics Confidence Index hit a bumpy patch and as a result is at 56.3 for the month of February. Should there be cause for concern? Perhaps not as in the almost two years of compiling the Stifel Logistics Confidence, the February 2015 reading of 56.3 is higher than the same month in 2014 (+0.3 points) and for 2013 (+3.8 points). Instead, the uncertainty in the six month outlook for air and sea may be the culprit for the bumpy patch. Indeed, there is much uncertainty, ranging from economic slowing in key economies as China and Europe to port congestion and to overcapacity. Furthermore, this uncertainty can be seen in the overall expected index which has declined 1.7 points since December. Air The air sub-index noted no change in the 6-month outlook but it did note a 1.2 point decline for the present situation. This decline was attributed to large declines for the Europe to Asia and Asia to Europe lanes which declined by 2.5 points and 3.2 points respectively to 44.7 and 58.7. This is the third consecutive month in which the Europe to Asia lane is below the 50-level and it is now at its lowest point since September 2013 when it recorded a 42.4 reading. Meanwhile, although the 6-month outlook remained unchanged from January, the US lanes recorded declines with Europe to the US declining 1.5 points to 62.4 and the US to Europe slipping 0.5 points to 57.7. However, despite the slips, both of these lanes still remain healthy. Sea Perhaps the bumpiness in the overall logistics confidence index can best be seen in how the sea sub-index has performed. For the present situation, the index declined only 0.1 points to 53.1. However, other than a slight 0.1 rise in December, this sub-index has noted declines since October. For February, all lanes except Europe to the US declined. Europe to the US recorded a good 3.5 point gain to 57.2 but perhaps worrisome is the fact that there are now two lanes, Europe to Asia and US to Europe that are below the 50-level which notes a contraction. For the US to Europe lane, February marks the second consecutive month of contraction. The 6-month outlook fell 2.5 points to 60.2. All lanes declined with the Asia lanes recording the largest drops. Europe to Asia declined 3.4 points to 60.9 while Asia to Europe fell 3.2 points to 59.0. The ever perplexing problem of overcapacity remains a concern and particularly as additional larger vessels enter the market. In addition port situations around the world – congestion, labor issues etc. – are muddying the situation further. Until these issues are resolved, an uncertain outlook will continue. Question of the Month For this month, we asked survey respondents, “What are inventory levels like right now in Europe relative to the norm?” The majority, 51.1%, indicated that inventory levels have remained the same while 24.4% indicated higher than normal inventories and again, 24.4% noted lower than normal inventories. While there was no commentary surrounding these figures, it was good to see that on average, there perhaps is no need to wave any red flags in terms of inventory levels.