The December LMI read in at 54.2, down (-1.5) from November’s reading of 55.7, and the lowest reading since April 2024. In a repeat of what was seen in October, the rate of expansion was faster in the second half of the month, moving from contraction at 48.2 in the first half of December to 54.9 later in the month. The contraction in the first half of December was not indicative of slowness in the logistics industry. Rather, it was likely a product of the rapid holiday rundown of extreme levels of inventory, according to the December 2025 Logistics Managers' Index, produced by researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
“The reason for this push was strong consumer spending throughout the holiday season. Card companies Mastercard and Visa both report increases in U.S. holiday spending, showing 3.9% and 4.2% increases respectively. Consumers went for value throughout the holiday shopping season, with more secondhand goods being purchased during the 2025 holiday season than in previous years. Analysts warn that, in a continuation from 2024, a significant volume of spending may have been subsidized by ‘buy now pay later’ loans,” the report says.
Key takeaways:
· The dissonance between consumer spending and consumer sentiment has been a running theme through 2025. For instance, U.S. GDP was up 4.3% in Q3, which is the fasted rate of expansion since Q3 2023. The expansion came on the back of stronger than expected consumer spending. However, there is evidence that a disproportionate level of spending came from top earners, partially explaining the divergence in sentiment and spending.
· The confusion is being reflected at the policy level. The U.S. Federal Reserve reduced the key interest rate by a quarter point at their mid-December meeting. This cut brings the key rate down to 3.6%, the lowest rate in three years.
· There continues to be cross pressures in the manufacturing and global trade that provides the volumes that feed the logistics industry. The Purchasing Managers’ Index read in at 51.8 in December, down slightly (-0.4) from November and marking the slowest rate of growth in the ongoing five-month expansion. Despite the U.S. import volume contracting 8% in 2025, global container volumes are up 2.1% due to expansion of imports into Africa, the Middle East, India, and Latin America, some of which is due to re-directed Chinese products no longer moving to the United States. In November Chinese exports to the United States were down 29% year-over-year, reflecting this new world order and leading to higher tariffs.
· Even with the contraction in inventory volumes, inventory costs continued their run of price increase in December, albeit at a slower rate (-8.0) of increase at 62.9. Inventory costs also saw a significant shift over the course of the month, going from slight expansion at 54.3 early in December to a more robust 71.4 later on. It is another signal that the inventory rundown in December was due to high levels of consumer sales (much of which included expensive last-mile delivery) that inventory costs continued to expand so robustly even as inventory levels dropped at their fastest rate ever.
· Respondents expect the inventory levels/inventory costs dynamic to continue in 2026, predicting mild expansion (59) for the former but robust expansion (72.1) for the latter. This is particularly pronounced at the retail level as downstream respondents predict keeping inventory levels very lean at 50, while still paying high inventory costs at 73.8.
· At the same time, their upstream counterparts predict that inventory levels will be a bit higher at 63 with associated expansion in inventory costs at 71.4. The discrepancy in predictions for upstream and downstream inventory levels likely reflects larger retailers looking to keep inventories low – potentially by pushing them upstream – to improve cashflow and avoid tariff-related costs for as long as possible.
· Warehousing utilization experienced a drop (-4.7) to 42.9, marking the second consecutive month that this metric has reached an all-time low. Looking at broader statistics, U.S. warehousing vacancy was up to 7.6% in Q3. This exceeds the pre-pandemic average of 7.1% and provides further evidence that the construction cycle that kicked off at the start of the decade is slowing down. This trend could continue as U.S. manufacturers reported a pullback on orders for components and raw materials in November, with purchasing activity hitting its lowest level since May.
· Warehousing prices continued to expand (+3.3) at a rate of 66.2. This was driven more by upstream (68.8) than by downstream (59.5) respondents, likely reflecting mass destocking at the retail level. Warehousing price is the one metric that has never contracted in the history of the LMI. Whether inventories are up or down, the cost of storing them continues to grow. This looks to be the case in the near future as well, with respondents predicting future expansion of 74.7 over the next 12 months. This suggests that even with the softness in capacity, there will still be rising costs in warehousing markets.
· Transportation capacity is down (-13.1) to 36.9, the lowest level since October 2021. This is also the first time this metric has contracted since March 2022, which was the start of the previous long freight recession. This contraction is consistent across every respondent group. There is some conjecture that the decline in capacity is due to English-language crackdowns.
· Transportation metrics had been stunted by the static buildup of inventories throughout most of 2025. However, from the second half of October through the end of the year, they picked up significantly in a way that has been consistent with seasonality.
· The higher transportation prices come despite U.S. diesel prices averaged $3.50 per gallon in the last reading of 2025. This is down 4.4 cents per gallon from a week before and 0.3 cents down from the same time a year ago.
· Respondent predictions for the overall index are 65.3, which is up (+2.4) from November’s future prediction of 62.9, and would represent a slightly faster rate of growth than the all-time average of 61.3. Respondents are once again predicting more moderate expansion in inventory levels at 59.0 (+2.3) with much higher expected increases in associate inventory costs at 72.1 (+0.4).
· Respondents (particularly those upstream) are anticipating a significant uptick in transportation metrics, predicting tightening transportation capacity at 40.5 (-6.5), and associated increases in the expansion rates of transportation utilization at 70.3 (+3.9) and transportation prices at 76.8 (-1.6). If these predictions hold, it would mark a significant shift in transportation markets. The key to this prediction will be consumer demand holding steady despite potential price increases.
