Driven by a whole host of factors, most notably increased costs, the logistics sector expanded in May for the second consecutive month, according to the recently-released Logistics Manager’s Index (LMI).
The monthly LMI is a joint project among researchers from Arizona State University, Colorado State University, University of Nevada, Reno, Florida Atlantic University, and Rutgers University, and also receives support by Council of Supply Management Professionals (CSCMP). CSCMP. The LMI is written by Zac Rogers Ph.D., Steven Carnovale Ph.D., Shen Yeniyurt Ph.D., Ron Lembke Ph.D., and Dale Rogers Ph.D.
The report’s authors explained that the LMI score, or reading, is based on eight “unique components” within the logistics sector, including: inventory levels and costs, warehousing capacity, utilization and prices and transportation capacity, utilization, and prices.
The May LMI reading, at 59.4, marked a 0.6% increase over April’s 55.8, while posting a 5.8% annual gain, as well as a 12.3% increase over May 2023’s 47.3. The impact of the aforementioned increased costs was evident in the report, as its authors explained inventory movements “slowed significantly compared to observations from earlier in the year. And they added that even though volume gains are slower, May inventory costs, up 2.8% to 78.4, mark its highest reading going back to October 2022.
What’s more, the LMI showed a 26.8 percent difference between inventory costs and inventory levels, which marks the third-largest going back to the establishment of this report.
“This suggests that the inventories were rushed into the country earlier this year are now static and holding them is expensive,” it said, adding that was supported by available Warehouse Capacity down 5.4%, to 50.0, and Warehousing Prices down 0.2%, at 72.1, pointing to a lack of available capacity.
Looking at its transportation-focused metrics, Transportation Capacity, at 54.7 was off 0.5%, to 54.7, Transportation Capacity was flat, at 50.0, and Transportation Utilization, at 52.6, fell 0.7%, its lowest reading since November 2023’s 50.0, while not contracting since July 2023.
May’s LMI reading, the report observed, represents some stabilization coming not long after March’s seven-month low, at 57.1, and also February’s almost three-year high, at 62.1.
This report comes out at a time when the U.S. economy and, by extension, the logistics and supply chain sectors continue to deal with high levels of uncertainty, and some pessimism, too. That was seen in U.S. GDP down 0.2% in the first quarter, while the fourth quarter of 2024 came in at 2.4%, for its first decline in three years, and better than expected due to what it called the “continued resilience of the U.S. consumer,” while consumers expect inflation to increase in 2025.
“Consumers have cited several reasons for pessimism, including uncertainty about tariffs, the high costs of borrowing, and the continued aftermath of the inflation of the last few years,” the report stated. “There is pessimism in boardrooms as well. U.S. C.E.O.’s reported a confidence score of 34 in the Conference Board and Business Council report for the second quarter. This score read in at 60 in the first quarter, meaning this is the largest quarter-over-quarter drop in this metric in more than 50 years. That being said, up to this point, steady consumer spending has ensured that the employment market continues to forge ahead, with experts predicting that the U.S. added 150,000 jobs in May. There are signs however that U.S. consumers are slowing down. Spending was up 0.2% in April, which is down from the 0.7% expansion we saw a month before. This came despite wages being up 0.8% on the month.
A 0.6% increase in the savings rate over the same period suggests that U.S. consumer spending may have been high as consumers tried to avoid potential tariffs. Many of those large purchases (for products like autos) may have already happened, and now consumers might be holding steady as they wait for more certainty on global trade. The upside to the slowdown in spending is that the Personal Consumption Expenditures (PCE) index is down to 2.1% year-over-year, almost in line with the Fed’s preferred expansion rate of 2%.”
Addressing the ongoing impact of shifting trade policies and tariff actions on market conditions, the report said that it is difficult to have too much certainty in the trade situation, citing the May 30 announcement by President Trump regarding a doubling of tariffs on steel and aluminum imports from 25% to 50%, effective July 4.
“Supply chains are resilient and could eventually deal with trade regulations,” the report said. “However, the continued uncertainty around what the rules will actually be makes it difficult to implement any long-term shifts in strategy or spending. The surge we saw in the first quarter of 2025 happened because shippers were attempting to bring in as many goods as possible ahead of potentially punitive tariffs. Even though costs were high, there was a sense that they could grow higher in the future. Today, after several rounds of start-and-stop tariffs, shippers may doubt that the highest levels of threatened tariffs will ever come to pass. At the same time, costs are higher on imports from essentially every country than they were a year ago.”
What’s more, the current trade situation and outlook remains on a cautionary track for shippers, the report explained, due to three key factors: inventories are high already from the beginning of the year; there are still the equivalent of 30-40% tariffs on anything coming in from China, and 10% from most other countries; and given the pattern tariffs have taken thus far, the 145% tariffs that had been threatened on China may never actually come to pass—and if they do it is unlikely they will be permanent.
As usual, the LMI does an excellent job of putting market conditions into perspective, not just for shippers, but, really, for all industry stakeholders. There are more than a few moving parts, impacting key areas of logistics and supply chain operations, to be sure. While trade and tariffs are still clearly at the top of the list, everything the report covers, measures, and addresses, needs a watchful eye—now more than ever. With the two ongoing tariff pauses set to expire in July and August, all eyes will be on not only how the industry reacts but also what may happen next, and the LMI will be relied on to help industry stakeholders navigate the confusion and uncertainty.
