- Input demand beginning to recover across all major markets,
after a protracted nearly two-year period of decline
- North American suppliers see capacity stretched for the
first time in nearly a year as manufacturers, especially in
consumer-facing sectors, report growth
- Global transportation costs fall despite Red Sea
disruptions
CLARK, N.J., March 14, 2024 /PRNewswire/ -- 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 — rose
further in February. While global supplier capacity is still
underutilized, the index increased to -0.08, from -0.12 in January,
its highest in 10 months. After nearly a year of declining supplier
activity, capacity pressures have begun building again.
Global demand for raw materials, commodities and components also
showed signs of recovery in February after a nearly two-year period
of decline due to destocking and high inflation. Input demand was
stable in Asia, signaling
restocking and economic resilience across the region. Similarly,
evidence of inventory building in North
America suggests the continent's manufacturers are preparing
for growth. In fact, capacity at suppliers to North America was stretched for the first time
since March 2023, with backlogs
ticking higher as a consequence.
Notably, we continue to see evidence that the Red Sea attacks
have had a negligible impact on global supply chains. The most
visible effect was an uptick in transportation costs in January,
but global logistics costs fell during February.
"Globally in February, we saw supply chains being more utilized,
suppliers are busier, and input demand and manufacturing are
turning a corner after nearly a year of low-capacity utilization,"
explained Mukund Acharya, vice
president, consulting, GEP. "Suppliers to North America were the busiest globally last
month, spurred by the Inflation Reduction Act and Bipartisan
Infrastructure Law driving economic activity in construction,
semi-conductors, and renewables."
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.
FEBRUARY 2024 KEY
FINDINGS
- DEMAND: Although global demand for raw materials,
commodities and components was still weak by historical standards,
the downturn cooled, with trends improving across all major
markets.
- INVENTORIES: After reaching a seven-month high in
January as the Suez Canal disruption led to an increase in safety
stockpiling, reports of firms building inventory buffers to protect
against shortages or price changes fell in February.
- MATERIAL SHORTAGES: Reports of item shortages
remained among the lowest seen in four years.
- LABOR SHORTAGES: There was some further upward movement
seen in the frequency at which global manufacturers were reporting
shortages of staff. Albeit the highest in six months, reports of
poor labor availability remained only just above historically
typical levels.
- TRANSPORTATION: Global transportation costs decreased in
February, indicating a reduced impact on global supply chains from
the disruption to shipping through the Suez Canal.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: Index rose to 0.17, from -0.33,
its highest since January 2023,
showing stretched supplier capacity as manufacturers are boosting
inventories and preparing for near-term production growth.
- EUROPE: Index rose
sharply again to -0.41, from -0.63. While this is a sizeable
improvement, the continent is still experiencing economic
stress. Factory purchasing activity in Europe remained depressed amid the ongoing
recession in Germany's
manufacturing industry, but recoveries in southern Europe supported the index's move higher.
- U.K.: Index hits 10-month high of -0.34, up from
-0.62 previously. U.K. companies report a marked uplift in safety
stockpiling activity due to Red Sea disruptions.
- ASIA: Index
stabilizes at -0.02, falling slightly from 0.14 in January as sharp
manufacturer purchasing growth in India is offset by weaker demand in
Japan, Vietnam and Taiwan.
For more information, visit www.gep.com/volatility.
The next release of the GEP Global Supply Chain Volatility
Index will be 8 a.m. ET, April 12, 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.
- A value above 0 indicates that supply chain capacity is being
stretched and supply chain volatility is increasing. The further
above 0, the greater the extent to which capacity is being
stretched.
- A value below 0 indicates that supply chain capacity is being
underutilized, reducing supply chain volatility. The further below
0, the greater the extent to which capacity is being
underutilized.
For more information about the methodology, click here.
Full historical data dating back to January 2005 is available for subscription.
Please contact economics@spglobal.com.
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. 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. To learn more, visit
https://www.spglobal.com
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