US manufacturing picks up in January on back of growing demand
Supply chains were operating at full capacity in January, according to the GEP Global Supply Chain Volatility Index, with the exception of Europe, which remains in a manufacturing recession.
The global index – which tracks demand conditions, shortages, transportation costs, and inventories and backlogs – remained flat at -0.21 in January, down marginally from -0.20 in December. A value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized.
The survey data, which includes 27,000 businesses globally, was captured prior to the Trump Administration’s announcement of 10% tariffs on China, the announcement (and one-month pause) of 25% tariffs on Canada and Mexico, and the announcement of 25% tariffs on steel and aluminum.
January saw a marked increase in procurement activity in North America, with the regional index rising to -0.22 from -0.53 in December. That growth was driven by US factories, as purchasing managers in Mexico and Canada made procurement cutbacks.
In Asia, producers bolstered demand for inputs to meet growing production, led by China, India, and South Korea. The regional index rose marginally to 0.03 from -0.09, with global factory procurement in line with its historical average.
“January’s rise in manufacturers’ procurement across APAC and the US signals steady growth ahead in Q1,” said John Piatek, GEP’s vice president of consulting. “Globally, companies are largely taking a wait-and-see approach to tariffs rather than absorbing the immediate cost of increasing buffer inventories.”
Europe’s industrial economy continued to struggle, with the regional index dropping to -0.61 from -0.49. European manufacturing has been contracting for nearly two years, with Germany, France, Italy, and the UK holding back on material purchases in January.
Reports of increases in inventory levels due to concerns about price or supply were low in January, while reports of shortages of critical items were at their lowest point in five years.
There was a rise in reports of factory backlogs due to labor shortages, while transportation costs rose to their highest level in six months.
