Warehouse space shrank in September at one of the fastest rates in LMI history

The Logistics Managers' Index rose to 70.2 in September, up from 66.6 in August. That is well into expansion territory. Underneath it, though, warehousing capacity fell 14.2 points to 39.3 and transportation capacity slipped 5.6 points to 34.4.

The index is compiled by researchers at Florida Atlantic University, Arizona State University, Colorado State University, Rutgers University and the University of Nevada, Reno. They attribute the headline gain largely to rising inventory levels and higher warehousing utilization. That detail matters. Some of the expansion comes from buildings filling up, which is the other side of the capacity drop.

For anyone running a distribution center or buying freight for the holiday stretch, the question is where the squeeze lands. The September data points to a specific month and a specific handoff.

Stock piling up at the wholesale tier

Inventory levels rose 6.1 points to 58.9. Most of that growth came in the first half of September and among upstream firms, meaning wholesalers and distributors were carrying most of the goods. Retailers, for now, are further down the line.

Inventory grew, yet both capacity lines contracted further. The researchers read that combination as system-wide supply chain capacity tightening: the network's ability to store available goods and move them to retailers keeps shrinking.

The biggest move came in warehousing capacity. Its 14.2-point drop put it under the 50 line that divides expansion from contraction. Steven Carnovale, who serves as associate dean of graduate programs at FAU's College of Business, said the pace of this warehouse decline ranks among the quickest shifts the LMI has recorded in its 10 years. In his view, the drop came mainly from businesses getting ready for holiday shopping, with most of that activity at the retail level.

Carnovale also pointed to the timing that makes this matter. October is often the month when inventory held by wholesalers, now at high levels, moves down to retailers. He flagged that transfer as the thing to watch, given what freight currently costs. Transportation capacity also contracted further in September.

Read side by side, the September numbers describe a mismatch between the goods that exist and the network's ability to store and move them to retailers. For a wholesaler holding high inventory, that suggests the October transfer to retailers could meet the same tight warehousing and transportation capacity that September already showed.

Fuel, durables and the price lines

The cost readings sat well above 50. Inventory costs reached 79.9, and only once since August 2025 has that measure expanded faster. The survey links part of that to demand: consumers reported buying durable goods early because they expect prices to rise.

Transportation prices gained 2.7 points to 92.7. Fuel costs are weighing on larger carriers and feeding into retail prices.

The durables detail adds demand pressure to a supply squeeze. Buying ahead puts goods into the system now, just as the room to hold them shrinks. Diego Comin of Dartmouth College and Robert C. Johnson of the University of Notre Dame, in a February 2026 Brookings paper, argue that expectations about how supply chain trade will change have an independent effect on inflation, apart from current costs. Shoppers buying ahead of expected increases look like a small, consumer-level cousin of that idea.

Put the four lines together and the picture is simple. More goods, less room to put them, fewer trucks to move them, and a higher price on every mile. Respondents expect exactly that going forward: a tight, expensive supply chain in which warehousing and transportation firms facing higher costs may pass them along, eventually to consumers.

Two limits on that reading are worth keeping in view. The index records the direction respondents report, so it does not say whether freight prices are rising because of fuel, because of the capacity drop, or both; the survey ties the increase to fuel, and the capacity figures move alongside it. And Carnovale's seasonal explanation is the strongest case against a lasting squeeze: if the warehouse drop is mostly retailers staging for the holidays, some of that space should free up once the goods move through.

How tight capacity reaches the shelf

Economists have spent the past few years tracing how logistics pressure turns into consumer prices, and recent work helps explain why a capacity squeeze can matter beyond the freight invoice. In a column for CEPR's VoxEU, Baslandze and Fuchs paired S&P Global Panjiva shipment records covering U.S. maritime imports with receipt-level consumer price data from Numerator. The Panjiva bills of lading record importers, shipment timing, ports of entry and product classifications. The Numerator receipts cover both bricks-and-mortar and online purchases, so the authors could measure prices at the firm, product and month level.

According to the authors, their findings show that the disruptions firms ran into carried through to what shoppers paid. Those disruptions included pricier imported goods, steeper transportation costs and, above all, delivery-related availability constraints. The effect on consumer prices came through two channels: directly, as the affected firms set their own prices, and indirectly, as rivals selling in the same product market adjusted their pricing in response.

Their key measure is the delivery shortfall. For each importing firm, they compare recent cumulative imports with that firm's own 2019 schedule. A positive shortfall means the firm received less than its usual seasonal pattern and product mix would predict. They cannot see inventories directly, so they treat the shortfall as a proxy for replenishment pressure. To separate supply shocks from demand shifts, they compare firms in the same product category whose pre-pandemic reliance on particular ports differed. Firms tied to ports where dwell times later rose were more likely to come up short.

That design lines up closely with the LMI's question. A shortfall measures whether goods arrive on the schedule a seller planned around, not whether they exist somewhere upstream. September's index describes plenty of goods upstream and less capacity to move them, and that is the condition the measure is built to catch.

Their argument is that a firm unable to restock on schedule faces a different pricing problem from one that just pays more per unit: promotions get harder to sustain, stockouts become more likely and remaining inventory becomes more valuable. In their framing, disruptions make goods both more expensive to obtain and harder to replace. When rivals are short too, customers have fewer alternatives, and even firms that were not disrupted may raise prices. When cost and availability shocks are widespread, the authors write, price increases can be broader than a firm-by-firm tally of shocks would suggest.

Right now the goods exist. The September LMI shows the strain in moving them, which is the step that would turn an upstream inventory surplus into a retail availability problem if the October handoff runs late.

Why the length of the squeeze matters

Whether a squeeze reaches prices also depends on how long it lasts. Comin and Johnson argue that the effect of a supply chain cost shock depends on whether it hits immediately and fades, or persists and is anticipated. They also describe a second channel: supply chain constraints that directly limit production capacity. When those constraints bind, aggregate supply is essentially vertical, and inflation responds to demand differently than in normal times.

That gives Carnovale's seasonal explanation real stakes. A warehouse drop driven by holiday staging fits the immediate, transitory pattern. A capacity line that stays low after the goods move would start to look persistent, and their framework treats that case separately.

Where the economy sits in the cycle matters too. Sebastian Laumer and Huachen Li, in a December 2026 Journal of International Money and Finance paper, find that supply chain shocks consistently raise inflation across countries and over time, and that the effects are significantly more severe during expansions. An earlier Economic Modelling study by Zouhair Mrabet, Mouyad Alsamara, Karim Mimouni and Abdulkareem Awwad, published in January 2025, also treats the link between supply chain pressure and U.S. consumer prices as time-varying. It tests that link alongside GDP, interest rates and oil prices.

The LMI's 70.2 measures expansion in logistics activity, not the whole economy, so the parallel with Laumer and Li is loose. It would matter if the wider economy is also expanding while these capacity readings stay below 50, because that is the setting where they find the strongest inflationary effects.

Breadth matters as well. Delia Macaluso and Michael McMahon, writing for the Economics Observatory, list logistics (storage and transport) among the main input costs for most businesses. They note that when inputs common to most firms rise, more sectors raise prices. Warehousing and trucking are inputs nearly every goods seller buys, which suggests a squeeze in both at once could reach further than a cost spike confined to one industry.

October's handoff decides it

The operators closest to this are wholesale and distribution leaders holding elevated stock, and the retail logistics teams receiving it. For companies that ship most of their holiday volume from upstream buildings into store networks in October, the September data describes the conditions they are shipping into: shrinking warehouse capacity, transportation capacity at 34.4, and transportation prices at 92.7.

The October index gives the next answer. A rebound in warehousing capacity after the handoff would support Carnovale's seasonal reading. A capacity line that stays below 50 once the goods have moved to retailers would mean the tightness is outlasting the holiday build, and the cost lines in the 80s and 90s would have more time to work their way into prices.