GEP: Western factories cut purchasing again in December

Factory purchasing in North America and Europe fell again in December, according to GEP’s monthly supply chain volatility index report – signaling a deteriorating near-term outlook for Western goods producers.

Although the global index edged up to -0.17 in December from -0.29 in November, underlying data signaled softening manufacturing demand in North America and Europe. Asian manufacturers showed greater resilience, with steady buying in China and growth in South Korea and Vietnam.

An index value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized. GEP’s index tracks 27,000 business globally.

December saw North American factory purchasing decline for the sixth consecutive month.  Mexico registered the steepest contraction, although Canada and the US were also weak.

North America’s index score, however, ticked up to -0.37 from -0.53 in November. 

European factory purchasing also further declined in December, driven by pronounced cutbacks in Germany. Europe’s index score rose to -0.17 from -0.33 in November because of labor-related constraints impeding order completion.

In Asia, the regional index score dipped slightly to -0.20 from -0.16, but factory purchasing showed greater resilience. Buying activity at Chinese factories stabilized, while demand for production inputs increased in South Korea, Vietnam, and Taiwan.

“Strong headline GDP growth in the US is masking a more cautious reality for manufacturers,” said John Piatek, vice president, consulting, GEP. “North American and European firms are cutting purchases and inventories, anticipating softening demand in 2026.”

In December, reports of stockpiling due to supply or price concerns remained below average, while transportation costs were in line with the long-term average. Reports of labor shortages rose to a 14-month high in December and were above the long-term average, with shortages centering on Europe.