Manufacturers in North America reduced their purchases of raw materials and intermediate goods in October, according to the GEP Global Supply Chain Volatility Index. The fall in input demand—a key early indicator of factory output—was the steepest since May and suggests that production in the region is set to cool in the coming months.
“North America is seeing the clearest sign yet of a manufacturing pullback,” says Michael DuVall, VP, consulting, GEP. “Manufacturers are buying less and working down inventories, which points to weaker production through the winter. With space capacity across global supply we do not anticipate any price pressure, beyond tariffs, on buyers.”
Key takeaways:
· The Volatility Index registered –0.33 in October, indicating that global supply chain capacity remains underused. Manufacturers across major economies continued to keep inventories lean and curb new purchases of inputs.
· In North America, the slowdown followed several months of tariff-driven stockpiling earlier in the year. Firms reported both lower material purchasing and a reduction in deliberate inventory building, taking pressure off supply chains which are now running well below full capacity.
· Asia’s momentum also faded. A pullback in factory buying across China offset continued strength in India, leading to a broader softening across the region.
· In Europe, manufacturers showed only a marginal increase in activity. Capacity at suppliers remains underutilized, and firms in Germany, France, Italy, and the UK continued to restrict raw material purchasing, underscoring a sluggish industrial recovery.
· September’s boost in factory purchasing – the strongest since June 2022 – was reversed in October as manufacturers in key economies such as China and the United States reported slowdowns in procurement. Factories’ orders of commodities, components and intermediate goods remain subdued, indicating a soft near-term outlook for producers.
· Reports from global procurement managers of an increase in stockpiling due to price or supply fears remain historically low, indicating limited concern about purchasing price inflation or shortages. The data continue to demonstrate a preference among manufacturers for lean warehouses.
· The global item shortages tracker remains well below its long-term trend level, signaling healthy supply levels for the world’s manufacturers. Factories will have little, if any, challenges in sourcing vendors for commodities, components and other intermediate products.
· There was a modest rise in labor-related capacity constraints during October, with reports of backlogs rising due to inadequate staff supply ticking up to a four-month high. Nevertheless, the labor shortages tracker was only marginally above its long-term trend.
· Global transportation costs ticked down slightly in October to just below historically average levels.
