Global supply chains operating at full capacity in January
North America at a 6-month high in supply chain volatility index.
The GEP Global Supply Chain Volatility Index recorded -0.21 in January, which indicates that the world’s supply chains are largely operating at full capacity.
“January’s rise in manufacturers’ procurement across APAC and the US signals steady growth ahead in Q1,” said John Piatek, GEP’s vice president of consulting.
North America recorded a six-month high in supply chain volatility index, up to -0.22 from -0.53, indicating a pick-up in procurement across the region at the start of the year.
Meanwhile, Asia saw the index rose to 0.03 from -0.09, suggesting that suppliers to the region are generally operating at full capacity.
Activity levels across Europe's supply chains remained weak, given that the index fell to -0.61 from -0.49.
UK's index hit a 13-month low in January, from -0.41 to -0.63, suggesting a weaker outlook for 2025 for UK manufacturing.
“Globally, companies are largely taking a wait-and-see approach to tariffs rather than absorbing the immediate cost of increasing buffer inventories. However, many Western firms are accelerating China-plus-one investments to diversify and near-shore manufacturing, assembly, and distribution. European manufacturers are especially vulnerable, as the sector has been contracting for nearly two years with no turnaround in sight. In the US, where manufacturing represents just 12% of GDP, the bigger concern for business is the potential revenue losses in China because of trade tensions.”
One significant observation at the beginning of the year was the notable increase in procurement activity across North America, driven entirely by US manufacturers.
In contrast, purchasing managers in Mexico and Canada reported procurement cutbacks, suggesting a bleak near-term outlook in those regions.
In Asia, many major producers increased their demand for materials to address the rising production needs, particularly China and India. South Korea also reported a considerable surge in January.
Meanwhile, Europe’s industrial sector continues to lag, with data indicating persistent high levels of spare capacity within the continent’s supply chains. Factories in Germany, France, Italy, and the UK reduced material purchases in January, pointing to a continued manufacturing recession in Europe.
The Global Supply Chain Volatility Index data was gathered just before the US administration announced tariffs on China, as well as the initial announcement and subsequent pause of tariffs on Mexico and Canada.
