- Worldwide supply chain spare capacity rises, adding to the
calls for the Federal Reserve to lower interest rates
soon.
- Asian factory demand at its weakest since December 2023, partly because of a notable
decrease in purchasing by Chinese factories.
- Suppliers to North America
report underutilized capacity, with Mexican manufacturers reporting
lower input demand for the first time since October 2023.
- European market continues to struggle, with region's
manufacturing recession persisting.
CLARK, N.J., Aug. 12, 2024
/PRNewswire/ -- In July, the GEP Global Supply Chain Volatility
Index — a leading indicator tracking demand conditions,
shortages, transportation costs, inventories and backlogs based on
a monthly survey of 27,000 businesses — signaled underutilized
capacity at global suppliers for the first time since April,
falling to a four-month low.
The greatest level of slack in supply chains was in Europe, which continues to grapple with
recession conditions in its manufacturing sector, especially in
Germany. Asia growth also cooled as factory demand in
the region contracted to its weakest since December 2023. Underlying data revealed a
decrease in purchasing activity by Chinese factories — the first
time this has occurred in nine months. Japan's manufacturing sector was also a source
of weakness.
Suppliers to North American companies reported slightly
underutilized capacity during July, as was the case in June.
Slowing purchasing activity was seen across all three countries
within the region, with Canada
reporting the steepest contraction. Notably, Mexican factories,
which have been a driver of growth in the region this year,
reported lower input demand for the first time since October 2023.
"In July, purchasing activity by global manufacturers declined,
indicating that economic growth is slowing, adding to the calls for
the Federal Reserve to lower interest rates sooner rather than
later," explained Mike Jette, vice
president, consulting, GEP. "This is not alarming data. The world's
supply chains continue to operate efficiently, with no sign of
stockpiling, shortages, or price pressures. But to head off any
material slowdown in the second half of the year, manufacturers do
need demand to increase."
Interpreting the data:
Index > 0, supply chain
capacity is being stretched. The further above 0, the more
stretched supply chains are.
Index < 0, supply chain
capacity is being underutilized. The further
below 0, the more underutilized supply chains
are.
JULY 2024 KEY FINDINGS
- DEMAND: Having recovered in the first half of the year,
global factory purchasing activity fell by the greatest margin
since the end of 2023 in July, indicating renewed weakness in the
world economy. Central to this decline was a fresh slowdown in
Asia, driven by China and Japan. Europe's manufacturing recession persisted,
especially in Germany, where
factory purchasing contracted sharply.
- INVENTORIES: The inventory cycle has stabilized. While
reports from global businesses of safety stockpiling due to price
or supply concerns were below typical levels, the underlying
indicator has generally trended in line with its long-term average
so far this year.
- MATERIAL SHORTAGES: Reports of item shortages fell
slightly in July, down to their lowest level since January,
signaling high stock levels at vendors of commodities and critical
raw materials.
- LABOR SHORTAGES: The supply of labor is not an
inhibiting factor for global manufacturers, as reports of backlogs
due to insufficient staffing capacity are at typical levels.
- TRANSPORTATION: Although supply chain activity dipped in
July, global transportation costs are at the highest in 21 months,
largely driven by Asia.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: Index
unchanged at -0.11, indicating slightly underutilized capacity
across the region's suppliers. Manufacturers in the U.S.,
Mexico and Canada all reported a softening of demand in
July.
- EUROPE: Index fell
sharply to a three-month low of -0.49, down from -0.13.
Europe's manufacturing sector
recession is persisting, with major economies, such as Germany, at the heart of the decline.
- U.K.: Index dropped to 0.11, from 0.49 in June, but
still signaling capacity pressures at the U.K.'s suppliers.
- ASIA: Index slipped
from June's 16-month high of 0.35 to 0.07, its lowest since April.
Demand for inputs at Asian factories was at its weakest this year,
principally because of a softening in China and Japan.
For more information, visit www.gep.com/volatility.
Full historical data dating back to January 2005 is available for subscription.
Please contact economics@spglobal.com.
The next release of the GEP Global Supply Chain Volatility
Index will be 8 a.m. ET, September 11, 2024.
About the GEP Global Supply Chain Volatility Index
The GEP Global Supply Chain Volatility Index is produced by
S&P Global and GEP. It is derived from S&P Global's
PMI® surveys, sent to companies in over 40 countries,
totaling around 27,000 companies. The headline figure is a weighted
sum of six sub-indices derived from PMI data, PMI Comments Trackers
and PMI Commodity Price & Supply Indicators compiled by S&P
Global. For more information about the methodology, click here.
About GEP
GEP® delivers AI-powered procurement and supply chain
solutions that help global enterprises become more agile and
resilient, operate more efficiently and effectively, gain
competitive advantage, boost profitability and increase shareholder
value. Fresh thinking, innovative products, unrivaled domain
expertise, smart, passionate people — this is how GEP SOFTWARE™,
GEP STRATEGY™ and GEP MANAGED SERVICES™ together deliver
procurement and supply chain solutions of unprecedented scale,
power and effectiveness. Our customers are the world's best
companies, including more than 550 Fortune 500 and Global 2000
industry leaders who rely on GEP to meet ambitious strategic,
financial and operational goals. A leader in multiple Gartner Magic
Quadrants, GEP's cloud-native software and digital business
platforms consistently win awards and recognition from industry
analysts, research firms and media outlets, including Gartner,
Forrester, IDC, ISG, and Spend Matters. GEP is also regularly
ranked a top procurement and supply chain consulting and strategy
firm, and a leading managed services provider by ALM, Everest
Group, NelsonHall, IDC, ISG and HFS, among others. Headquartered in
Clark, New Jersey, GEP has offices
and operations centers across Europe, Asia,
Africa and the Americas. To learn
more, visit www.gep.com.
About S&P Global
S&P Global (NYSE: SPGI) S&P Global provides essential
intelligence. We enable governments, businesses and individuals
with the right data, expertise and connected technology so that
they can make decisions with conviction. From helping our customers
assess new investments to guiding them through ESG and energy
transition across supply chains, we unlock new opportunities, solve
challenges and accelerate progress for the world. We are widely
sought after by many of the world's leading organizations to
provide credit ratings, benchmarks, analytics and workflow
solutions in the global capital, commodity and automotive markets.
With every one of our offerings, we help the world's leading
organizations plan for tomorrow, today.
Media
Contacts
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Derek Creevey
|
Joe Hayes
|
Email:
joe.hayes@spglobal.com
|
GEP
|
Principal
Economist
|
|
Phone: +1
732-382-6565
|
S&P Global Market
Intelligence
|
|
Email:
derek.creevey@gep.com
|
Phone:
+44-1344-328-099
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