Asian manufacturing takes off in February as North America slips

Supply chains in Asia were at their busiest level since October 2022 while North American factory input demand softened in February, according to GEP’s monthly supply chain volatility index report.

The global index score rose to 0.09 from -0.21 in January on the back of Asian growth in manufacturing activity. 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.

Worldwide purchases of raw materials, commodities, and critical components rose at the fastest pace in almost four years, with data suggesting procurement was broad-based – across both capital-intensive and consumer-facing industries. This points to a cyclical upswing prior to the war in the Middle East, which the US and Israel launched at the very end of February. As such, its significant impacts are not reflected in this month’s report.

Asia’s index score rose to 0.40 from 0.12, its strongest score since March 2022, as China, Japan, India, South Korea and Taiwan reported strong rates of purchasing growth among key markets.

North America’s score slipped to -0.26 in February from 0.06 in January, reflecting a loss in momentum in the US manufacturing economy. Canadian factories, however, lifted their purchases of raw material and intermediate products for the first time in more than a year.

Europe’s score rose to 0.05 from -0.27, driven by Germany, as the continent’s industrial recovery continued to make progress.

“The war with Iran is already creating an oil supply shock that will disrupt global supply chains,” said John Piatek, vice president of consulting at GEP. “Companies need to assess their exposure to energy, petrochemical and shipping costs now, while US manufacturers should also move quickly to proactively secure price reductions from suppliers following the Supreme Court’s tariff ruling.”

In February, stockpiling due to supply or price concerns was below historical levels. Reports of backlogs due to labor shortages were in line with their historical average, as were global transportation costs.

The items in short supply indicator, however, rose markedly in February.