Holiday Sales Boom Hides Economic Cracks in Supply Chain Data

BOCA RATON, FL – January 15, 2026 – While preliminary reports pointed to a robust holiday shopping season, a key barometer for the U.S. economy is flashing a warning sign. The Logistics Managers’ Index (LMI) for December 2025 registered its lowest score in over a year, signaling a significant slowdown in supply chain activity that belies the cheerful top-line sales figures and reveals a deepening fissure in the American consumer landscape.

The LMI, a joint project from researchers at Florida Atlantic University and four other schools, came in at 54.2 for December. While any score above 50 indicates expansion, this marks a steep drop from the 57.3 recorded in December 2024 and represents the tenth consecutive month the index has remained below its long-term historical average. The slowdown was primarily fueled by a historic depletion of inventories, raising critical questions about which consumers are actually spending and what the data portends for the economy in 2026.

The Great Consumer Divide

At the heart of the logistics slowdown is a record-breaking plunge in inventory levels. The LMI’s inventory component plummeted an unprecedented 17.4 points to a score of 35.1, deep in contraction territory. This rapid sell-down of goods was a direct result of holiday shopping, but experts caution against interpreting it as a sign of broad-based economic health.

“The rapid and historic decrease in inventory levels is likely due to strong holiday sales... coupled with previously high inventory levels,” said Steven Carnovale, Ph.D., an associate professor of supply chain management in FAU’s College of Business. “The lingering question is which segment of the consumer market is buying. Recent reporting suggests high earners are driving significant sales, whereas lower earners have stagnated and shifted to necessary spending only.”

This analysis points to a growing economic bifurcation that the aggregate sales numbers obscure. While affluent households, buoyed by asset appreciation and stable employment, continued to spend on discretionary goods, lower- and middle-income families faced persistent inflationary pressures and higher interest rates. This forced many to curtail spending or focus exclusively on essentials, a trend that began well before the holiday season. The result is a paradox: a market that appears strong on the surface but is being propped up by a narrowing slice of the population, leaving retailers and manufacturers who cater to a broader audience in a precarious position.

This divergence has direct consequences for supply chains. As warehouses emptied of holiday goods, the LMI’s warehousing utilization metric fell to an all-time low of 42.9. Simultaneously, warehousing capacity expanded to 61.2, suggesting a potential oversupply of space as companies that had stockpiled goods now find their facilities underused.

A Barometer for a Turbulent Economy

The logistics industry often acts as the economy's canary in the coal mine. Its activity—the movement, storage, and management of goods—tends to reflect shifts in demand and economic health weeks or months before they appear in broader metrics like GDP. The December LMI reading, therefore, is being scrutinized by analysts as a key indicator for the year ahead.

The 54.2 score, while indicating slow growth, is part of a sustained trend of deceleration. Compared to the LMI's all-time average of 61.7, the index has been underperforming for nearly a year, suggesting a persistent cooling in the engine of commerce. This contrasts sharply with the frantic pace seen during the post-pandemic boom, which saw the index peak at 76.2 in March 2022.

The complexity of the current economic moment is visible within the LMI's eight components. While inventory levels and warehouse utilization plummeted, transportation metrics moved in the opposite direction. Transportation utilization, which measures the use of available trucks and fleets, jumped 6.7 points to 58.2. More significantly, transportation prices rose 1.8 points to 66.7, reaching their highest level since January 2025. This tightening in the freight market, even as overall logistics activity slows, points to deep-seated structural issues that are likely to intensify.

The Persistent Squeeze on Transportation

The rising cost and contracting capacity of transportation represent a major headwind for businesses entering 2026. The LMI’s transportation capacity sub-index fell sharply by 13.1 points to 36.9, a strong signal of contraction. This squeeze is not a new phenomenon but the continuation of a long-term crisis rooted in a chronic shortage of qualified truck drivers.

Industry groups like the American Trucking Associations have warned for years about the growing deficit of drivers, a problem fueled by an aging workforce, high turnover rates, and the challenging lifestyle associated with the profession. Despite efforts to raise wages and improve conditions, the shortage persists, creating a fundamental constraint on the nation's ability to move goods efficiently.

This structural limitation means that even a modest uptick in demand—such as the one needed for retailers to replenish their depleted inventories—can cause a sharp spike in freight rates. With less capacity available, shippers must compete more aggressively for limited space on trucks, driving prices upward. This dynamic puts direct pressure on the profit margins of retailers and manufacturers, who must either absorb the higher costs or pass them on to consumers, potentially fueling further inflation.

Bracing for 2026: Rebuilding and Rising Costs

Looking ahead, supply chain executives surveyed for the LMI predict a period of cautious rebuilding. After the holiday sell-off, retailers must restock their shelves, which will drive a mild expansion in inventory levels and costs over the coming months. However, the strategies for this replenishment are likely to be far more nuanced than in previous years.

According to Carnovale’s analysis of future predictions, a split is emerging within the supply chain itself. “Upstream partners are planning on holding inventories at higher levels than their downstream counterparts, perhaps acting as a safety stock, whereas downstream is expecting to operate more leanly,” he noted. This suggests manufacturers and wholesalers may buffer themselves against volatility, while retailers, wary of uncertain consumer demand, aim to keep their own stock levels trim.

This strategic divergence, combined with the tightening freight market, sets the stage for a challenging year. Carnovale predicts that tightened transportation capacity, rising prices, and increased utilization are "likely to strengthen freight markets, should predictions come to fruition." For businesses, this translates into a continued battle against rising logistics costs that will impact everything from raw material procurement for manufacturers to final-mile delivery for e-commerce retailers.

In response, companies are accelerating investments in supply chain resilience, from adopting automation in warehouses to diversifying their supplier base and exploring nearshoring strategies. The December LMI data serves as a stark reminder that in the interconnected global economy, headline numbers rarely tell the whole story, and navigating the year ahead will require a keen understanding of the complex forces shaping the flow of goods.