Global Manufacturing Activity Jumped in May: GEP Study

The GEP Global Supply Chain Volatility Index increased notably in May to 0.21, from -0.18 in April, signaling that global vendors are working at capacity.

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The GEP Global Supply Chain Volatility Index increased notably in May to 0.21, from -0.18 in April. Crucially, this was the first time since March 2023 that the index is in positive territory, signaling that global vendors are working at capacity and that supply chains are at their busiest for more than a year.

"The broad-based nature of the breakout we're seeing in May is a hugely encouraging sign for the global economy going into the second half of 2024," says Mudit Kumar, VP, GEP Consulting. "If this trend continues, businesses can expect renewed efforts by vendors to raise prices, especially given the recent surge in the cost of many commodities."

Key takeaways:

  • A key factor behind the index's increase in May was a further improvement in global manufacturing demand, leading factories to ramp up their purchases of raw materials, commodities and components. Purchasing growth was especially strong in Asia, particularly in key exporting countries such as China, India and South Korea.
  • Suppliers to North America also got busier during May, with their capacity slightly stretched as a result. This partly reflected more supportive demand conditions for businesses in the United States and Mexico. The European market, which has been a laggard since mid-2022, improved notably, especially in the UK.
  • Globally, reports of backlogs increasing because of staff shortages at suppliers of critical goods and inputs hit their highest in almost 1.5 years in May, suggesting capacity expansion is required to meet existing and future orders. Overall, this paints an optimistic picture for the outlook in H2 2024 for global supply chains.

  • Global demand for raw materials, commodities and components is now trending in line with its long-term average.
  • The inventory cycle has stabilized, with firms neither building up stocks excessively nor aggressively destocking to improve cash flow and cut costs.
  • Global item supply remains robust, with reports of shortages at low levels.
  • Global transportation costs remain stable, close to historically typical levels.