The May Logistics Managers’ Index (LMI), which is a strong indicator of the health of the US logistics sector, dipped slightly in May be to 69.5, down 0.4 points from April, as transportation costs continue to increase “at a significant pace”.

LMI authors say the May LMI still marks the second fastest level of expansion since March 2022 when the index was 76.2.

The LMI is 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), using responses from supply chain professionals.

It is calculated on a combination of eight unique components which make up the logistics industry, including: Inventory Levels and Costs, Warehousing Capacity, Utilisation, and Prices, and Transportation Capacity, Utilisation, and Prices.

A reading above 50.0 indicates logistics is expanding in the US; a reading below 50.0 indicates a shrinking logistics industry.

LMI authors state the slight slowdown in the rate of expansion between April and May is due to a combination of factors.

The expansion rate of Inventory Levels slowed (-1.5) to 54.8, with the majority of that slow down coming in the second half of the month as Inventory Levels went from robust expansion at 60.5 in early May, to almost no movement at 50.9 later in the month. 

Consequently, Warehousing Capacity moved (+5.0) from contraction to mild expansion at 50.5. 

Despite the slowdown in inventory expansion and increase in storage capacity, costs remain elevated. 

Inventory Costs are up (+9.4) to 84.1 which is the highest reading for this metric since May of 2022. 

Warehousing Prices also remain elevated, coming in at 70.7, which is above the threshold LMI authors would consider a significant rate of expansion.

Unsurprisingly, transportation costs are up 1 point m-o-m to 96.0, with LMI authors stating it is “the fastest rate of expansion ever recorded for any metric in the nearly 10-year history of the index”.

Conversely, Transportation Capacity continues to contract quickly at 31.7, and Transportation Utilisation expansion remains elevated at 69.5. 

“The transportation market has been tight, with prices growing at an unprecedented rate since the closure of the Strait of Hormuz,” LMI authors’ state. 

“The spike in fuel has led to increases for all three of our price and cost metrics, with aggregate logistics costs reading in at 250.9, which is the highest reading since March of 2022. 

“US supply chains have largely continued operating despite the disruption of 20% of the globe’s oil exports…Supply chains have been resilient despite these ongoing disruptions. 

“However, in the past this level of elevate cost has eventually led to significant levels of supply-driven inflation. It will be important to continue monitoring these costs through the summer to observe if they begin to significantly impact both upstream and downstream demand.”