GEP: Purchasing activity continues to contract as global manufacturers retrench
The GEP Global Supply Chain Volatility Index fell to -0.37 in August, recording a second consecutive month of underutilized capacity in supply chains – as global economic conditions continue to slide.
August’s index score was the lowest of 2024, with suppliers in all global regions experiencing a slowdown in activity. An index value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized.
Conditions in North America were weakest, falling sharply to -0.62 in August from -0.11 in July. Factories in all three countries recorded lower purchasing activity, but especially in the US.
Europe’s manufacturing recession deepened in August, with the region’s index score falling to -0.53 from -0.49. Germany and France drove the continent’s manufacturing weakness, while UK manufacturers remained at close to full utilization.
Asian suppliers, who experienced strong growth in the first half of the year, reported spare capacity as the index score dropped to -0.07 from 0.07. A decline in Chinese procurement was the key driver, offsetting strength in India.
“What is most concerning in our August data is that manufacturers are aggressively drawing down their inventory suggesting they’re preparing for a sustained soft patch,” said Neha Shah, president, GEP. “To head off a material slowdown in the second half of the year, manufacturers need to see interest rates lowered, and for the U.S., China and the EU to avoid raising tariffs and trade barriers.”
Safety stockpiling remained well below historically typical levels and reports of item shortages were the lowest since January 2020. Global transportation costs cooled slightly in August after heating up significantly in the two previous months.
