Doesn't it seem as though we are forever plunging into recession, then clawing our way back to recovery? In recent months we've seen hints that the U.S. economy is on the mend, with unemployment levels dropping. At the same time, consumer confidence is once again on the decline. It's a mixed bag by anyone's measure, but we've yet to return to pre-recession numbers in key sectors.

Now comes the International Monetary Fund to inform us that things are indeed getting better - slowly. The IMF's latest World Economic Outlook projects 3.5-percent growth in global output this year, and 4.1 percent next year. For the U.S., the picture is somewhat less rosy - 2.1 percent this year and 2.4 percent the next, although both numbers would be well above the 2011 level of 1.7 percent.

There are, of course, some caveats. Europe represents a huge uncertainty. The Greek debt crisis has abated for now, but there are serious concerns about the size of Spain's debt load, as well as those of Portugal and, to a lesser extent, Ireland. For this reason, the IMF expects real GDP in Europe to contract by .3 percent in 2012, and grow only by .9 percent in 2013. The continent's overall results will be dragged down by a 2-percent plunge in GDP in Italy and Spain (that's "negative growth" in economist-speak), and sluggish expansion in Germany and France.

The situation in China is especially interesting. By all accounts, that economic behemoth will continue to grow, but at a lesser rate of around 8.2 percent. (Which, of course, is still massive by any other economic power's standards.) Growing domestic demand and the rise of a middle class with real purchasing power will help to keep China's economy humming. On the other hand, China's export prowess will be challenged by the steady appreciation of the yuan, which has risen in value against the dollar by some 8 percent over the last two years, and 30 percent in the last seven. Meanwhile, soaring labor rates are making Chinese manufacturing less competitive with other countries. And there remain nagging questions about the stability of China's banking system, which reportedly is saddled with huge amounts of non-performing loans. Any combination of these factors could trigger a reversal of China's economic miracle, with a severe impact on the entire world.

What does all this mean for the supply chain? In many ways, logistics serves as the bellwether of the global economy. You can get a pretty good sense of how the economy is faring by examining the health of carriers, warehouses and distribution service providers. So it was instructive to hear Benjamin Gordon, managing director of BG Strategic Advisors, LLC, a logistics investment bank, offer his outlook for the coming year. He spoke at the recent annual convention and expo of the International Warehouse Logistics Association in San Francisco.

BGSA hosts a supply chain conference each January. This year's event, examining the current state of logistics, "saw growth across the board," Gordon reported. Prices in the benchmark Cass Freight Index, which tracks North American freight volumes, were up 14 percent. Truckload rates alone were projected to rise 10 percent. While that's hardly good news for shippers, it signals a somewhat healthier carrier sector.

Or so one hopes. Growth has also been accompanied by record levels of volatility, Gordon said. As of early spring, the Drewry Global Rate Index had plummeted by more than 20 percent since August 2011. (The more recent trend on the ocean side is up.) Fuel prices are doing their usual seesaw act, and are likely to climb higher in the months ahead, sparked by continuing political tensions in the Persian Gulf.

All of these factors are combining to give carriers of every mode a rough ride. "We expect to see some shipping bankruptcies in the next 12 to 24 months," said Gordon.

And that's just for starters. Gordon also sees an uptick in global mergers and acquisitions in the logistics sector. Recent examples include Norbert Dentressangle's purchase of APC Beijing International, and UPS's pursuit of TNT. Expect many more such global deals, Gordon said.

Expect also a blurring of the lines between providers of various kinds of supply-chain services. Waste processors, for instance, might venture into reverse logistics, which is also a prime target of niche vendors of warehousing and other aspects of logistics. Convergence will be the industry's key word in the months ahead.

There is also a resurgence of activity on the financial side, as hedge funds and other deep-pocketed investors turn their attention to the logistics arena. Last year, investor Bradley S. Jacobs of Jacobs Private Equity LLC sank $150m into Express-1 Expedited Solutions Inc., a handler of time-sensitive and emergency shipments. "He's using it as a platform to turn it into a much bigger business," said Gordon. "The logistics business is his next target."

Jacobs had done his homework. A survey of 200 companies, taken by BGSA at its supply-chain conference, found more than half reporting growth of better than 10 percent in the prior year. Virtually every one had experienced some degree of expansion, Gordon said. The industry looks to be an attractive target for outside investment.

For logistics providers, challenges abound: rate pressures, increased competition, regulatory changes, rising costs, access to capital and a dearth of qualified talent among them. In fact, it's tempting to use the logistics industry as a scale-model of the global economy. Both are on the rise, yet facing big obstacles on the road to recovery. They'll get there eventually - an inch at a time.

Next: The outlook for logistics and the commercial real estate market.

- Robert J. Bowman, SupplyChainBrain

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