October LMI Shows Flat Growth, Marking the Eighth Month Below Long-Term Trend

The logistics industry stayed flat in October, marking the eighth consecutive month the index has read below the historical average, according to a report from researchers at Florida Atlantic University and four other schools.

October’s Logistics Managers Index (LMI) read in at 57.4, unchanged from the prior month. Any score above 50 indicates the industry is expanding; a score below 50 suggests contraction.

Despite October’s stagnant score, there was noticeable divergence among the metrics used to calculate the score. While inventory and warehousing metrics experienced slower growth, warehousing capacity, transportation and prices showed higher rates of growth.

Transportation prices rose 7.5 points to 61.7, and transportation utilization increased by 7.3 points to 57.3, reversing the stagnation seen in September.

“These changes break the two-month trend of a negative freight inversion, which is likely due to the forthcoming pressure on transportation providers as they anticipate the holiday push,” said Steven Carnovale, Ph.D., associate professor of supply chain management in the College of Business. “This is particularly clear when we see the upstream growth significantly slower than downstream (e.g., retailers), where expansion of capacity is chief among their priorities.”

The LMI, a survey of director-level and above supply chain executives, measures the expansion or contraction of the logistics industry using eight unique components: inventory levels, inventory costs, warehousing capacity, warehousing utilization, warehousing prices, transportation capacity, transportation utilization, and transportation prices. Along with FAU, researchers at Arizona State University, Colorado State University, Rutgers University, and the University of Nevada at Reno calculated the LMI using a diffusion index.

Overall, inventories are beginning to decline ahead of the holiday sales season, indicating the supply chains are shifting from static movement to seasonally dynamic movement. Smaller firms also drove much of the expansion this month as inventory started flowing to consumers ahead of the holiday season.

Looking ahead, respondents reported they expect supply chain conditions to improve over the next 12 months. The predicted rate of expansion is 64.6, which is 5.0 points higher than September’s forecast of 59.6 and would exceed the historical average.

“The impact of the government shutdown will also need to be considered as we move forward, as cargo air traffic has been interrupted, which can lead to disruptions and lack of inventory for retailers,” Carnovale said. “This, coupled with the Supreme Court’s forthcoming decision on tariffs, will shape what the outlook will be for the next several months.”

-FAU-