US possibly heading for soft landing, Europe for recession, GEP data says

16 October 2023 2 min. read
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The US economy appears to be heading for a soft landing while Europe seems to be approaching a recession, according to data from GEP’s September Global Supply Chain Volatility Index.

The monthly index tracks demand conditions, shortages, transportation costs, inventories, and backlogs across 27,000 businesses globally. An index value above 0 means supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized. The GEP index reached a peak of 6+ points in late 2021.

The overall index score fell to -0.35 in September, down from -0.18 in August.

Europe was the principal driver of the month’s rise in idle vendor capacity, with the region’s index score dropping to -1.01 from -0.50 in August. Europe’s suppliers had one of the highest levels of spare capacity since the 2008 global financial crisis – with the weak demand signaling elevated recession risk.

US possibly heading for soft landing, Europe for recession, GEP data says

North America’s index, meanwhile, rose slightly to -0.30 in September from -0.55 in August, signaling higher odds of a soft economic landing.

Asia’s index dropped to -0.20 from 0.06 in August, reflecting a slump in purchasing activity after a resilient year-to-date.

“We’re now into our sixth consecutive month of notable excess supplier capacity globally, but the good news is it’s not getting substantially worse, except in Europe, where recession seems likely,” said Jagadish Turimella, chief operating officer and co-founder, GEP. “By contrast, we expect U.S. suppliers and businesses to be steady for the rest of the year, unless the labor disputes in health care and the auto sector spread, or there is a price spike in oil, its derivates or agricultural commodities.”

Although the global downturn in demand for raw materials and components appears to be stabilizing, there have yet to be any signs of improvement. Global businesses continue to shy away from stockpiling, indicating a pessimistic outlook for demand, while item scarcity remains at historically normal levels.

Labor shortages remain at a generally unproblematic level for businesses, while transportation costs fell slightly in September after an August rise.