Demand at Asian factories rises at highest rate in two years, says GEP report
Demand at Asian factories rose at the highest rate in two years, according to the monthly GEP Global Supply Chain Volatility Index.
India and China drove recovering demand for raw materials, commodities, and components – boosting their input purchases in March to the strongest degree since December 2021. Given China’s centrality to global production, the uptick indicates strong prospects for manufacturing growth worldwide.
Nonetheless, GEP’s index fell to -0.32, down from a 10-month high in February of -0.08.
GEP’s monthly survey tracks 27,000 businesses globally to measure demand conditions, shortages, transportation costs, inventories, and backlogs. An index value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized.
Though the level of spare capacity grew in March, GEP says this was a result of manufacturers using up inventory surpluses accumulated because of the Red Sea and Panama Canal disruptions. Reports of safety stockpiling were at their lowest since November 2019.
Relatedly, global transportation costs fell to their lowest level since December, as data has shown little to no impact to global supplies from the Red Sea attacks and reduced capacity on the Panama Canal.
Though the North American regional index score fell to -0.31 in March from 0.17 in February, suppliers indicated difficulties in meeting orders as backlogs of work increased due to a lack of staff.
“In March, orders placed with Asia’s suppliers ramped up, which is a strong signal of accelerating growth in manufacturing in the coming months,” said Roopa Makhija, president and co-founder, GEP. “In North America, suppliers are reporting difficulties meeting orders due to staff shortages, signaling capacity constraints, even though input demand declined slightly. This does mean that manufacturers have strong pipelines which undermines the Fed’s expressed desire to cut interest rates, at least in the near-term.”
