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GEP Global Supply Chain Volatility Index plunges across major economies in October
US factories cut back purchases whilst Chinese counterparts report growth.
The GEP Global Supply Chain Volatility Index declined to -0.39 in October from the previous month's -0.43, indicating one of the highest levels of spare capacity at global suppliers in over a year, with no imminent turnaround in Western manufacturing in sight.
Procurement activity remained weak worldwide as the demand for commodities, components, and raw materials continued to contract at one of the steepest rates seen so far in 2024.
In October, suppliers to major markets experienced contractions. North American supply chains saw increased slack due to declining factory activity in the United States. Purchasing managers in the U.S. significantly reduced their buying volumes, suggesting a decrease in production levels.
Asia also had spare capacity in October, primarily due to the strong expansion of industries in countries like India, which contrasted with contractions seen in Western markets. China's factory production growth rebounded, and procurement activity rose after three months of contraction. However, Japanese and South Korean producers decreased their purchases, which could negatively impact manufacturing in those economies.
Europe continued to struggle in October, with underutilized vendor capacity reflecting subdued demand in key manufacturing areas. The retrenchment of Germany's automotive manufacturing sector posed a significant challenge for European factory output.
October also marked the 14th consecutive month of negative scores for the "items in short supply" indicator, highlighting an oversupply of commodities and intermediate goods compared to current global manufacturing demand.
Todd Bremer, Vice President of GEP, said, "We are in a buyers' market. Suppliers have reported spare capacity for four consecutive months, especially in North America and Europe where factory demand is decreasing. President-elect Trump will inherit U.S. manufacturers with excess capacity, while China and India show resilience in the Asian manufacturing sector."
