Inventory is rising, storage is getting more expensive, and smaller companies are carrying more of the expansion load. New research by Florida Atlantic University shows logistics activity is being reshaped as manufacturers and suppliers push products further downstream toward retail, with costs and capacity pressures building ahead of the holiday season.
Diverging Trends Across Costs and Capacity
The August Logistics Managers Index (LMI) registered 59.3, up slightly from July’s 59.2 but well below the historical average of 61.5. Any reading above 50 signals expansion, but the pace has clearly slowed. Inventory levels rose to 58.2, while inventory costs jumped to 79.2—a 7.3-point leap, highlighting how expensive it has become to hold goods. Transportation prices continued to contract, putting downward pressure on the overall index.
Researchers from Florida Atlantic University, Arizona State University, Colorado State University, Rutgers University, and the University of Nevada at Reno noted that warehousing capacity is nearing contraction territory as firms lock in space amid tariff uncertainty. Steven Carnovale, associate professor at FAU’s College of Business, said companies appear to be “consuming more warehouse capacity” as they anticipate regulatory fluctuations and cost pressures. Recent trade reports also show that U.S. warehouse vacancy rates have fallen to near-record lows, further fueling price increases.
Smaller Firms Push Expansion, Upstream Activity Strengthens
While larger enterprises still have the advantage of scale and buying power, the data suggests small firms, those with fewer than 1,000 employees, are driving much of the expansion. Their logistics index reading came in at 62.7, compared with 58.2 for larger firms. Carnovale noted that smaller companies are “responding to hedge cost increases,” a shift visible in their higher overall logistics activity.
At the same time, the previous gap between upstream suppliers and downstream retailers has closed. Stronger activity among manufacturers and suppliers signals that more goods are flowing toward retail channels. This shift could mark a temporary stabilization in supply chain throughput, though the elevated cost indexes point to continued pricing pressure that may filter through to consumers. With consumer sentiment weakening, researchers caution that demand volatility remains a significant risk heading into the fourth quarter.
Why Rising Storage Costs Could Reshape Retail Pricing
The headline for August is not just expansion but the cost at which it comes. Elevated warehousing and inventory costs leave companies with limited options: absorb the expense, pass it downstream, or cut margins elsewhere. Historically, large firms could offset these pressures through bulk imports ahead of tariff hikes, but the growing role of small firms in driving activity suggests a different calculus. If downstream demand softens while costs remain high, the result may be sharper price increases at retail just as consumer spending cools.
