Global Supply Chains slow down as U.S. factories cut back on purchases
, APAC

Global supply chain slows as US factories cut back on purchases

Manufacturing demand weakened worldwide after American companies stockpiled goods ahead of expected tariff changes

Global supply chain activity declined sharply in July as US manufacturers drastically reduced their purchases of materials and components, according to new data released August 11.

The pullback came after American factories had rushed to build up inventories in June, anticipating the end of what experts call the "tariff pause,” which is a period when companies stockpiled goods to avoid expected price increases from new trade restrictions.

The GEP Global Supply Chain Volatility Index, which tracks demand conditions and supply chain pressures across 27,000 businesses worldwide, dropped to -0.35 in July from -0.17 in June. The decline signals growing spare capacity in manufacturing facilities around the world.

North America led the downturn, with its index falling to -0.33 from -0.06 the previous month. The sharp reversal follows June's surge when US companies front-loaded orders to beat anticipated tariff increases.

"When we remove companies' front-loading inventories and rerouting goods to avoid tariffs, the underlying picture points to slowing manufacturing demand worldwide," said John Piatek, Vice President of Consulting at GEP. "The July data shows a clear pullback in orders, with US manufacturers preparing for lower demand going forward."

The index measures supply chain stress on a scale where values above zero indicate stretched capacity and values below zero show underutilized capacity.

Asia and Europe Feel the Impact

Asian factory purchasing activity remained below normal levels, dragged down by weakness in Japan and South Korea - both countries that recently agreed to significant tariff deals with the United States. Taiwan also experienced an accelerated downturn.

However, China bucked the regional trend, with factory buying volumes rising in July after declining in the previous two months.

Europe's fragile industrial recovery also stumbled in July, with the region's index dropping to -0.30 from 0.01. Germany's economic rebound slowed, highlighting how delicate the continent's manufacturing recovery remains.

The United Kingdom continued to struggle, with its index declining to -0.58 from -0.41, indicating significant unused capacity in British supply chains.

Data showed that companies have reduced their safety stockpiling efforts, suggesting limited concern about future supply bottlenecks or price surges. Both staffing levels and transportation costs remained stable, with no signs of inflationary pressure from these sources.
 

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