ITS Logistics released its June Supply Chain Report, detailing record transportation costs driven by energy prices and capacity challenges. The report indicates that energy-driven inflation is reshaping consumer spending and pushing inventory costs higher as peak season approaches. Regulatory efforts continue to reduce capacity, increasing prices despite subdued demand.

U.S. inflation rose to 4.2% year-over-year in May, the highest reading in over two years. Core CPI, excluding food and energy, increased 0.2% month-over-month and 2.9% year-over-year. The Conference Board's Consumer Confidence Index fell for the first time in four months in May, with consumers redirecting spending toward essentials. Retail gasoline station sales climbed 26.5% year-over-year.

The Logistics Managers' Index (LMI) Transportation Prices reading reached 96.0 in May, the highest ever recorded. Rates for dry van and reefer capacity remained significantly above the five-year historical average. DAT data showed slight rate dips following the Commercial Vehicle Safety Alliance's Roadcheck Week, but ongoing legislative and enforcement activity are expected to continue driving capacity out of the market.

In the parcel and final mile sector, UPS and FedEx are shrinking networks and increasing revenue per package. UPS closed 23 facilities in 2026 with 27 more planned, while FedEx is executing consolidation through its Network 2.0 initiative. Warehousing data shows May Inventory Costs jumped 9.4 points to 84.1, the highest reading since May 2022, even as Inventory Levels flatlined.

U.S. containerized imports totaled 2,428,758 twenty-foot equivalent units (TEUs) in May, a 6.6% increase from April. China-origin imports rebounded sharply, climbing 19.9% month over month and 28.1% compared to May 2025. However, reigniting trade tensions may challenge this growth.

The U.S. Department of Agriculture on Wednesday released fiscal 2025 payment error rates for the Supplemental Nutrition Assistance Program (SNAP), revealing a national error rate of 10.62% and $10.1 billion in improper payments nationwide. This figure significantly exceeds the federal threshold of 6%, placing multiple states at risk of financial penalties under a new cost-sharing law set to take effect in October 2027.

SNAP provides monthly food assistance to low-income households. Payment errors, defined as benefits paid above or below the correct amount, are largely attributed to administrative mistakes rather than fraud. The new regulations will require states with error rates of 6% or higher to cover a portion of benefit costs, with penalties scaling up based on the severity of the error rate.

Financial Penalties for States

Under the new law, states with error rates between 6% and 8% must pay 5% of benefit costs. Those with rates between 8% and 10% are liable for 10%, while states exceeding 10% face a 15% cost-sharing requirement. Nine states, including South Dakota and Nebraska, posted error rates below 6% and will avoid these penalties.

Missouri, which recorded an 8.7% error rate, could face approximately $150 million in annual SNAP costs if benefit levels remain unchanged. "These payment error rates are further proof that state accountability is severely lacking in SNAP," said Agriculture Secretary Brooke Rollins.

State Responses and System Upgrades

States are investing millions to upgrade eligibility systems to comply with the new rules. Contractors such as Deloitte, Accenture PLC, and Optum are assisting states in updating SNAP and Medicaid systems to track work requirements, exemptions, and documentation. These upgrades come as SNAP enrollment has fallen from 42.8 million recipients in January 2025 to 38.6 million by January 2026, partly due to stricter work requirements and eligibility thresholds.

Some states may respond by tightening eligibility further or cutting spending in other areas like education or mental health programs. A survey by the American Public Human Services Association indicated that more than a quarter of states might narrow eligibility policies, while four are considering withdrawing from SNAP entirely. "There are billions of dollars that are at stake that states will have to find the money to be able to pay if they want to continue to operate a SNAP program," said Chloe Green, assistant director for policy at the association.