Asian manufacturing activity falls to lowest level in year-and-a-half
Asian manufacturing activity fell to its lowest level in 17 months, according to the most recent GEP Global Supply Chain Volatility Index.
The US-initiated trade war drove down supply chain activity in Asia, with the regional index score falling to -0.40 in May from -0.32 in April.
A value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized.
Chinese factories in particular pulled back their purchasing in May.
North America’s supply chain also remained underutilized, rising slightly to -0.24 from -0.34. The score increase was largely driven by increased purchasing from US manufacturers seeking to front-load inventories in anticipation of further tariffs. Mexico and Canada’s manufacturing sectors continued to experience weak conditions amid the US-led trade war.
Europe continued to edge toward industrial recovery, with the regional score remaining flat at -0.29. Although supplier capacity was still underutilized, the index score was still much higher than Europe’s average in the last two years.
Manufacturers in Europe, particularly Germany, have been buoyed by recently announced fiscal stimulus measures.
“US-China trade talks come at a critical moment — Chinese factory demand has dropped sharply, and US manufacturing is weighed down by excess capacity,” said John Piatek, VP consulting, GEP. “This isn’t just macro noise. Tariffs are already reshaping procurement strategies as companies front-load inventories, diversify suppliers, and brace for a longer game of economic decoupling.”
The global index score fell to -0.46 in May from -0.39 in April. GEP’s index tracks demand conditions, shortages, transportation costs, and inventories and backlogs across 27,000 global firms.
Global demand for raw material and components remained at its weakest level in the year-to-date, driven by retrenchment among Chinese factories.
Safety stockpiling remained at historically low levels, with European manufacturers continuing to favor lean warehouses.
Item shortages remained below the long-term average, while reports of staff shortages remained close to historically typical levels.
Global transportation costs in May were broadly in line with their long-term average.
