Report: Slowing Logistics Growth Raises Concerns of a Potential Economic Slowdown

Expansion in the supply chain is slowing as inventory growth weakens, suggesting that the inflationary effects of the current tariff and trade environment could become more apparent later this year, according to a report from researchers at Florida Atlantic University and four other universities.

The August Logistics Managers Index (LMI) came in at 66.6, down 2.2 points from July’s reading of 68.9.

Several signals along the global supply chain suggest that costs are rising even as the volume of goods moving through it expands more slowly. Inventory levels fell 2.2 points to 52.8, while manufacturers and suppliers reported a slight contraction to 49 points. Despite the slowdown in inventory growth, inventory costs rose to 78.6, while warehousing prices remained elevated at 75.

“This month’s logistics cost pressures and dynamics echo what most consumers feel: the cost of goods has been increasing, which is largely driven by the cost to hold and move them throughout the retail network,” said Steven Carnovale, Ph.D., supply chain expert and associate dean of graduate programs at 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 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.

Looking ahead, LMI respondents expect the logistics sector to continue expanding over the next year, but at a slower pace. The overall LMI is projected to reach 69.6, down from July’s forecast of 70.5. At the same time, respondents expect logistics costs to remain elevated, with warehousing prices projected to expand to 79.2 and transportation prices at 86.1. Transportation capacity is expected to remain in contraction to 43, suggesting that cost pressures may persist even as overall logistics activity continues to grow.

“Geopolitical conflicts are driving input costs for fuel and the related components needed for modern society, such as fertilizer, which is partially driving the predicted increases in costs in the logistics sector,” Carnovale said. “As these cost pressures rise and inflation continues to increase, the elevated levels of logistics costs will likely remain high.”

-FAU-