Logistics Manager’s Index Signals Healthy Logistics Recovery

The November Logistics Manager’s Index, compiled by researchers at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP), reads in at 58.4, down slightly (-0.5) from October’s reading of 58.9, which was the fastest rate of expansion since September 2022.

The overall index has now increased for 12 consecutive months, marking a full year of expansion since November 2023’s reading of 49.4, indicating a healthy, organic logistics recovery based on steady improvements in the fundamentals of the economy.

Key takeaways:

• The most notable movements in the LMI this month is the predicted slowdown in the expansion of inventory levels, which dipped (-3.3) to 56.1, keeping with normal patterns of seasonality. The slowdown in the build of inventory trickled down to a slowing expansion in warehousing utilization (-4.0 to 58.9) and transportation prices (-0.3 to 63.8), as well as increases in both warehousing (+0.8 to 56.7) and transportation (+1.7 to 52.6) capacity. Conversely, studies revealed increasing rates of expansion in inventory costs (+2.9 to 68.8) and warehousing prices (+0.8 to 68.8), the two fastest rates of expansion in this month’s reading.
• The steady growth of the LMI is reflective of the dynamics in the overall U.S. economy. Consumer spending was up in October, something that can be at least partially attributed to disposable income rising at an increased pace over the same period. U.S. wages have been growing faster than the rate of inflation for approximately two years. The U.S. economy has seen GDP increase by 2% or more in eight of the last nine quarters. The U.S. Consumer Confidence Index (CCI) reached 111.7 in November, up from October’s reading of 109.6.
• The belief by both small and large firms that the economy will be strong in Q4 seems to be affirmed by the strong Thanksgiving to Cyber Monday sales, as well as the consumer activity that preceded it.
• One potential complication on the horizon is the possibility that the incoming administration will implement tariffs that could potentially disrupt global supply chains that have on some levels only recovered from the pandemic within the last 12-18 months. While this diversification has been widespread, one of the primary shifts from U.S. importers has been towards Mexico. U.S. trading partners in the EU are also concerned about a potential move towards protectionist policies as well. The Eurozone recovered more slowly from the pandemic than the United States and is only recently exiting its long period of stagnation.
• Perhaps the most troubling news on this front comes from China. Despite the diversification of U.S. supply chains away from the previous over-dependence on China, they remain the third-largest trade partner of the United States and a critical supplier of several goods such as electronics.
• There are indications that this inflow of inventories will continue for the foreseeable future.

“It is impossible to say what will happen with trade policy in the near-term. As of this writing, the second Trump administration is still 50 days away, it is likely that policies will continue to evolve, and the threat of tariffs may merely be a negotiation tactic. However, it is worth pointing out that the U.S.-China trade war, which began in the summer of 2018, led to a decrease in freight traffic for both imports and exports and was one of the factors behind the freight recession of 2019 to early 2020. That being said, the 2018 tax cut was one of the things that had pushed freight into a boom in the first place – something that may be reflected in the strong uptick of many trucking stocks immediately following the election,” the report says.