Report: Supply Chain Growth Accelerates Despite Persistent Cost Pressures

Supply chains in the U.S. expanded in June, driven primarily by continued resilient consumer spending despite high inflation, according to a report from researchers at Florida Atlantic University and four other schools.

The June Logistics Managers’ Index (LMI) read 71.1, a slight increase from May’s 69.5. It marks the fastest rate of expansion, and the first reading above 70 since March 2022. Any score above 50 indicates the logistics industry is expanding; a score below 50 indicates contraction.

June’s expansion was largely driven by increased inventory levels among larger respondents and downstream retailers, and by greater pressure on warehousing utilization, warehousing prices, and transportation utilization. Consumer spending has remained surprisingly resilient despite elevated inflation and slower job growth, giving retailers greater confidence to replenish inventories ahead of the back-to-school and holiday shopping seasons. 

“In addition to the prepositioning of inventory for back to school and the holiday season, the push in inventory may also be to mitigate future tariff increases, and lock in pricing before any hikes take effect,” said Steven Carnovale, Ph.D., associate professor of supply chain management in FAU’s College of Business.

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.
Researchers at Arizona State University, Colorado State University, Rutgers University, the University of Nevada, Reno, and FAU calculate the LMI using a diffusion index to provide a dynamic view of the U.S. supply chain that anticipates economic shifts and trends.

Firms are now relying on proactive inventory investment rather than on a defensive inventory management strategy. Warehousing capacity is tightening as utilization and prices continue to rise. Transportation sectors remain elevated, as strong freight demand puts upward pressure on prices and utilization.

“The persistent increase in demand has already impacted container rates on inbound shipments,” Carnovale said. “We will need to monitor pricing moving forward to get a sense of how and to what extent such freight price increases will impact consumers.”

Looking ahead, respondents expect the U.S. supply chains to expand over the next 12 months, though much of that remains uncertain due to limited capacity and ongoing trade policy uncertainty. 

-FAU-