Inventory levels are growing at a robust rate, according to the October Logistics Manager’s Index, which is at 70.7, up (+0.5) from September’s reading of 70.2.

This is the second-highest reading in four years, behind only June’s reading of 71.1. 

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), released the report on November 3.

The report offers the following analysis as excerpted below.

The index has now come in over 70.0 for three of the last five months; it had not cleared this threshold for over four years before this recent run.

This has been a year of expansion in the overall index, with average LMI readings coming in at 67.4. This is up significantly from 2025’s average of 58.7 and is the second-highest calendar-year average, behind only 2021, in the 10-year history of the index.

We also see significant expansion in Aggregate Logistics Costs in October, with the three cost/price metrics combining for a score of 257.5 (on a scale of 0-300), which is up (+11.4) from September’s reading of 246.1 this month.

This is the highest reading for this aggregate metric since March of 2022, when supply-driven inflation was rampant in the wake of both the cessation of COVID-era demand and the invasion of Ukraine. Given the pressure on logistics costs, it is likely that we will continue to see supply-driven inflation continue to increase in the near term.

No matter what happens with inflation in the future, it is clear that the inflation that has already occurred is impacting some consumers. The University of Michigan’s measure of U.S. consumer sentiment was down slightly (-0.1) to 48% in October.

This decline was driven almost entirely by buying conditions for durable goods, which were down 18% due to high interest rates and concerns regarding affordability. Consumer sentiment is down 15% since the start of the war with Iran and down 10% year-over-year – the “current economic conditions” metric is down 20% from October 2025.

Inventory Levels picked up in October, coming in notably higher (+8.0) at 66.9, which is their fastest rate of expansion since September of 2022. This was driven by movements in the second half of the month, when Inventory Levels expanded notably faster at 72.1 than the still fast – but more muted- rate of 61.8 in the first half of October.

The increase in Inventory Levels has clearly been felt on Inventory Costs, which are also up significantly (+8.9) to 88.8, which is their fastest rate of expansion since March of 2022. 

After a year of playing things very cautiously due to doubts about the consumer and the high costs of tariffs and transportation, firms are now pulling inventories in as quickly as they can – often at high costs – in an effort to capitalize on what they hope will be a blockbuster holiday season.
 
Inventory movements like this have a significant impact on the economy. For instance, one of the primary drivers of increased GDP growth in the third quarter was the increase in private inventories, which contributed 1.61% to GDP growth – a sharp contrast from the -0.53% contribution from this category in Q2. 

Conversely, the primary downward pressure on Q3’s GDP reading came from net trade, where imports – particularly goods imports – dramatically outweighed exports as supply chains continued to stock up ahead of Q4.

 Retailers likely feel more confident about adding inventories for Q4 because the majority of consumer spending growth in Q3 came from spending on services (+1.89%) rather than on goods (+0.63%).

An additional green flag for potential consumer Q$ spending came with Amazon’s early October Prime Day, during which online retailers generated sales of $9.86 billion – up 8.5% year-over-year. Several retailers reported higher-than-expected consumer resiliency in Q3; there seems to be little reason to expect that to slow significantly in Q4.
 
It seems likely that inventories will continue to rapidly come into the U.S. in the near term. Similar to the U.S., China demonstrated significant GDP expansion in Q3, reporting 4.5% GDP growth from July to September. Their expansion was largely driven by growth in exports – to places like the EU and U.S.

Inventories continue to pour into the U.S., with the Port of L.A. continuing to project import volumes that are up between 33-54% year-over-year through the last week of October and the first two weeks of November. 

It is convenient then that in the last week of October the Ports of L.A. and Long Beach reportedly reached a deal with the Pacific Maritime Association to extend the contract of unionized watchmen that should guard against a potential early November strike.
 
The surge in inventories was clearly reflected in storage metrics. While the rate of contraction slowed (+4.2), Warehousing Capacity continued to contract at 43.5. With this reading, Warehousing Capacity has now contracted in six of the nine months of 2026. The tightness seems to be driven by Upstream firms, who report significant contraction at 37.5 – contrasting sharply with the reading of 50.0 and no movement reported Downstream.

Smaller firms are also struggling with storage availability, reporting Warehousing Capacity contracting at a rate of 40.0. This is markedly lower than the rate of 48.3 – which is close to no movement – being reported by larger firms.

The effects of this lack of capacity are seen clearly in our other metrics, where Warehousing Utilization (-5.5) continues to expand at 58.8, and Warehousing Prices are accelerating (+7.2) at 80.7, which is their fastest rate of growth since May of 2022.
 
The rapid expansion in price, along with the continued buildout in data centers, seems to have pushed the market towards adding some capacity.

 Amazon expects to spend $220 billion on capital expenditures this year. Data center construction often leads to increased demand for affiliated warehousing to store materials during construction and act as support buildings post-construction. The staging of construction materials during AI buildouts have also put increased pressure on outdoor storage. This pressure has driven up rents across several markets – particularly those close to in-demand build locations in the South and along the East Coast.

Adding to these costs is the continued push for automation. Walmart’s head of supply chain operations, Rob Montgomery, stated that distribution has reached “peak complexity” due to the continued proliferation of automation and complex, integrated systems in warehouses.
 
Costs also continue to expand rapidly in the freight market. While the rate of Transportation Price expansion did slow (-4.7) it still expanded at 88.0, which represents rapid growth. According to Sonar data, new truckload contracts are up 13.11% from the contracts they are replacing. 

Contracts lag spot markets and tender rejection rates. Given that tender rejection rates are holding strong at 13.9% while spot rates also remain elevated, it is likely that contract rates will continue to increase through 2026 as well.

As a result of high prices, Transportation Utilization continues to expand (-2.6) at the robust rate of 63.5. This is particularly true for Upstream firms, which report a significantly higher rate of Transportation Utilization growth (69.3) than their Downstream counterparts (53.6).

Intermodal continues to be a viable alternative, with containers and trailers transported by rail up 12.6% in the week of October 12th and up 11.8% two weeks later. Overall, intermodal traffic through the first 42 months of the year is up 4.7% from 2025..
 
One of the major drivers of the growth in Transportation Prices and Utilization is fuel costs. U.S. diesel prices were up to $6.352 per gallon in the last week of October. This is up $2.634 (71%) from the same time a year ago.

Average U.S. diesel prices had never been above $6.00 until the reading on September 14th of this year. The average has remained above $6.00 for six consecutive weeks since first crossing that threshold.

 It is unlikely that any potential relief will come in the form of Russia and Ukraine holding back on energy infrastructure attacks. Ukrainian forces struck a Russian refinery on October 30th, breaking what had been a 2-week moratorium on targeting oil infrastructure as a retaliation against increased Russian attacks against civilians.

As would be expected, high input costs are driving up carrier pricing. In mid-October, J.B. Hunt stated that they are likely to raise prices in an attempt to recoup increased operating costs due to labor, fuel, and insurance claims.

High costs have eaten into earnings at FedEx as well, where Q3 profits came in at $290 million – down considerably from profits of $920 million the year before (this slowdown was also likely affected by the spinoff of FedEx Freight.

High freight rates are driven by both high demand and a lack of supply. Transportation Capacity continued to contract (+3.6) at 38.0. This metric has now contracted in six of the past eight months. 

The contraction is due to a combination of factors, including reticence to make large capital investments, smaller carriers having difficulty reentering the market due to the wholesale-retail spread, and a lack of driving labor.

Fortunately, there is some action on the labor front, as U.S. for-hire trucking employment went up to 1.45 million employees in September – marking the first increase in 41 months..

This has continued into Q4 with UPS announcing plans to hire 100,000 seasonal employees to deal with the Q4 surge in parcel deliveries. Amazon has announced plans to hire 300,000 seasonal workers, and USPS is bringing on another 10,000.