On April 1, The March Logistics Manager’s Index was released and came in at 57.1, down 5.6 from February’s reading of 62.8.
The January and February readings represented the fastest rate of growth in the overall index since June of 2022. March’s reading is a departure from this trend, as this is the lowest overall reading for the index since August of 2024.
The contraction in the overall index was driven by a sharp decline in all three of the price/cost metrics, the authors noted. In January, all three metrics were up significantly, with all three of them reading in above 70.0 for the first time since 2022.
Other areas that changed this month included inventory costs (-6.7 to 70.6), warehousing prices (-16.0 to 61.0), and transportation prices (-9.0 to 56.4) all down significantly in March.
This suggests that supply chains revved up in February and early March to bring goods in, but have slowed in more recent weeks as more trade controls have been implemented, the authors said.
The authors offered the following analysis: (excerpted below)
The 5.6-point decline is the third largest in the history of the index. The only greater occurrences were a 6.6-point drop in April 2022, which was the month after Russia invaded Ukraine and set off inflation; and a 7.6-point drop in April of 2020, which was the first reading after COVID-19 lockdowns. That being said, a reading of 57.1 does still indicate a level of expansion that is within half a standard deviation of the all-time average of 61.6.
The dip to 57.1 is not troubling in a vacuum, the major point of concern is that it represents a deviation from the direction in which the logistics industry had been trending since reaching a low point in July 2023. If logistics activity stabilizes around its current levels, it would represent slow steady expansion. If however this movement is the start of a new pattern, and we see a drift towards contraction, it could spell trouble from a logistics industry that has only recently gotten back on its feet after a half decade dealing with COVID and painful inflation.
Nervousness regarding the direction of the overall economy is apparent places other than this report. The University of Michigan’s Survey of Consumers showed that consumer sentiment is 57.0. This is down 11.9% from last month and down 28.8% lower than the same reading last year. Sentiment has trended down all through 2025. Once again, the dip is driven by fears of renewed inflation, which at 5.0% are at their highest levels since November of 2022.
Relatedly, the Conferences Board’s monthly survey of forward-looking expectations for income, business, and labor market conditions dropped to 65.2, which is below the “expected recession threshold” of 80.0 and marks its lowest level in 12 years. Respondents indicated that the twin threats of tariffs and continued inflation were significant contributors to their pessimistic predictions.
A major source of worry regarding inflation is the uncertainty surrounding tariffs. In late March, the U.S. announced plans to implement a 25% tariff on imported vehicles. Officials stated that this would represent an additional 25% on top of other recently-implemented tariffs. Analysts suggest that this could add approximately $6,000 of costs to vehicles assembled in Mexico and Canada.
On the domestic front, the Federal Reserve once again left interest rates constant after their March meeting. Chairman Power stated that “further progress may be delayed” on inflation getting down to the Fed’s goal of 2% due to uncertainty surrounding trade policy. Interestingly, this announcement came a week after a report showing that U.S. inflation came in at 2.8% in February. While this was an increase of 0.2% on a monthly basis, it was slower growth than we saw in January.
There was also positive news regarding wholesale prices as the producer price index (PPI) showed no gain in February after increasing by 0.6% in January. It is important to point out that both of these measures would only reflect the initial 10% tariffs that were placed on China in early February and would not yet have captured costs associated with any other changes in trade policy. It will be interesting to see whether inflation rates continue slowing on this trajectory or not, and how any movements impact the Fed’s opinion on interest rates at their next meeting.
One of the primary challenges with readjusting supply chains to account for changes in trade policy is the uncertainty surrounding them. For instance, in late March President Trump stated that China approving the sale of TikTok could lead him to consider reducing tariffs between them and the U.S. The administration is also going back and forth on whether or not to implement reciprocal tariffs or a 20% flat tariff across the board. This speaks to the uncertainty underlying the current round of tariffs. If 20% tariffs might be eliminated due to a policy change on one specific social media company – something that had not previously been listed as a demand tied to trade and could happen any time ] – firms may be reticent to make significant investments to move manufacturing out of China.
Firms can work around tariffs if they become a long-term part of their supply chain (see the 60 years of steadiness in the U.S. pickup truck market post-“chicken tax”). However, it is exponentially more difficult for firms to adjust to significant new rules when it is unclear whether or not they will be permanent.
This uncertainty is reflected in the changing approach to inventories. Inventory Levels continued to increase at 61.2, though at a slightly slower rate (-3.6) than we observed in February. A bevy of statistics suggests that the inventory pull-forward in the first few months of the year was significant.
For instance, nearly 480,000 TEUs passed through the Port of Savannah in February, marking its busiest February on record. While March is not complete at the time of this writing, it appears that the business continued through at least the first half of the month. Commodities are a major component of the pull-forward of inventory. For instance, the U.S. will import approximately 500,000 tons of copper in March, over 6X above the 70,000 tons we would see imported in a normal month.
