Asian manufacturing activity hits 17-month low amidst rising tariffs

Supply chain utilisation has fallen to its lowest level since 2023.

Manufacturing activity in Asia dropped to a 17-month low in May, according to the GEP Global Supply Chain Volatility Index. The region’s index fell to -0.40, indicating the lowest supply chain utilisation rate since late 2023.

This marks the second consecutive month of declining purchases of raw materials and components.

Globally, the index fell to -0.46 during the same period. 

These declines are largely driven by reduced purchasing activity amongst Asian factories, particularly in China, where demand has pulled back sharply.

In contrast, North America's index improved slightly to -0.24 from -0.34. However, sentiment amongst factories, especially in Mexico and Canada, remains cautious.

Europe, meanwhile, is showing signs of a slow industrial rebound. The region’s latest index reading of -0.30 represents a marginal decline from April but still suggests stronger activity compared to much of the past two years.

Analysts credit recent fiscal stimulus in Germany with supporting regional manufacturing. The UK, however, continues to lag, with its index inching up from -1.12 to -0.97, still deep in underutilisation territory.