The US logistics sector entered the final month of 2025 with visibly softer momentum, as the Logistics Managers’ Index (LMI) declined for a second consecutive month, pointing to the slowest expansion pace since early 2024. The December reading of 54.2, down from 55.7 in the prior two months, highlights a cooling phase driven primarily by aggressive inventory drawdowns and shifting warehousing dynamics, even as transportation markets showed signs of renewed tightness. Together, the data suggest a sector transitioning away from post-pandemic excesses toward a more normalized, but uneven, operating environment.

Inventory Drawdowns Reshape Supply Chain Activity

The most significant pressure on the index came from inventories, where levels fell sharply following the holiday season. Inventory levels contracted deeply, reflecting a rapid runoff of elevated stockpiles that had built up earlier in the year. This adjustment eased inventory costs, which also slowed notably, reinforcing the view that firms are actively clearing goods rather than replenishing aggressively.

This pattern is consistent with retailers and manufacturers prioritizing balance-sheet discipline over volume growth. Rather than accumulating precautionary stock, firms appear increasingly confident in their ability to source goods on demand, a sign that supply-chain resilience has improved materially since the disruptions of 2021–2022.

Warehousing Capacity Rises as Utilization Weakens

Warehousing metrics underscored this shift. Capacity expanded further, while utilization dropped to a second consecutive all-time low. The combination suggests that physical space is becoming more abundant just as demand for storage softens. Warehousing prices, while still elevated in absolute terms, are increasingly vulnerable as excess capacity builds.

This dynamic reflects inventories being pushed downstream toward consumers rather than held upstream in distribution centers. The resulting imbalance may continue to pressure warehouse operators’ margins into early 2026, especially if consumption growth remains moderate.

Transportation Tightens Despite Broader Cooling

In contrast, transportation indicators moved in the opposite direction. Transportation capacity slipped back into contraction, while transportation prices edged higher. This divergence points to logistical bottlenecks emerging at the delivery stage, as firms move goods quickly through the system rather than storing them.

The rise in transportation prices suggests carriers are regaining some pricing power, potentially aided by seasonal demand, fuel cost sensitivity, and tighter fleet availability. While not yet indicative of a full-cycle upturn, the data hint that transportation markets may be closer to equilibrium than warehousing or inventory segments.

Macro Implications for Early 2026

At a broader level, the LMI’s December reading remains comfortably above the 50 threshold, confirming ongoing expansion. However, the deceleration from prior months signals that logistics is no longer acting as a growth accelerator for the economy. Instead, it is settling into a late-cycle normalization phase, shaped by cautious corporate behavior and more predictable demand patterns.

Historically, the LMI’s long-term average near the low 60s suggests current conditions are subdued relative to trend, though far from contractionary. For policymakers and investors, the data reinforce a narrative of slower, more selective growth rather than an abrupt downturn.

Looking ahead, logistics activity will be closely tied to consumer demand durability, inventory restocking decisions, and transportation cost trends. Any reacceleration would likely require clearer evidence of sustained end-market demand rather than temporary seasonal effects.