Global supply chain pressures eased in July 2026 as manufacturers reduced stockpiling and transportation costs declined, but critical shortages remained elevated and production backlogs continued to build, indicating incomplete recovery before renewed Middle East disruptions.
- Manufacturers scaled back safety-stock building in July after reaching a 3.5-year peak in Q2 2026, signaling reduced supply risk concerns
- Reports of critical items in short supply remained elevated globally, with production backlogs rising due to missing materials and components
- Transportation costs moderated significantly, falling to their lowest level since March and driving overall supply chain improvements
- Demand for raw materials weakened, particularly in China and the United States, as stockpiling-driven demand boost faded in Q3
- Geopolitical tensions in the Strait of Hormuz and rising oil prices threaten renewed disruptions to global supply chains
Global supply chain pressures eased in July as manufacturers reduced precautionary stockpiling and transportation pressures moderated. However, supply shortages remained elevated and production backlogs continued to build, indicating supply chains had yet to fully recover before the renewed disruption in the Strait of Hormuz, according to GEP’s Global Supply Chain Volatility Index.
The survey was mostly conducted before the latest escalation in the Middle East and renewed disruption to shipping through the Strait of Hormuz, providing a snapshot of global supply chains immediately before energy prices and geopolitical uncertainty increased again.
Key takeaways:
· Manufacturers scaled back safety-stock building in July following a 3.5-year peak in the second quarter of 2026, suggesting businesses believed supply risks were beginning to ease. Transportation costs also moderated, helping drive the overall improvement in global supply chain conditions.
· Despite the easing, reports of critical items in short supply remained elevated globally, while manufacturers reported rising production backlogs caused by missing materials and components. This indicates supply bottlenecks remain unresolved and could worsen if geopolitical tensions persist.
· Demand for raw materials and commodities remained strongest across Asia and North America, where manufacturers purchased inputs at a significantly faster pace than other major regions. Europe, by contrast, remained comparatively subdued, reflecting weaker manufacturing order books and lower inventory building.
North America Index fell to 0.76, from 1.17, pointing to a further easing of supply chain pressures faced by North American manufacturers.
July data indicated a slowdown in factory purchasing volumes. The index's demand component was its weakest in the year-to-date, driven principally by China, and to a lesser extent, the United States. The data suggest that the stockpiling-driven boost to demand has faded at the start of the third quarter.
Reports of global manufacturers stockpiling raw materials and intermediate products due to price or supply concerns fell for the first time since January, indicating that procurement leaders ran down the inventories built up since the Middle East war began.
The items in short supply indicator fell only fractionally in July, indicating a limited improvement in the availability of critical manufacturing inputs. Overall, supply shortages remained high by historical standards.
Manufacturers' reports of backlogs rising due to staff shortages remained anchored, signaling that labor was not a hindrance to capacity utilization during July.
The global transportation cost indicator fell again in July, reaching its lowest level since March. That said, data were principally collected prior to global oil prices surging towards the tail-end of the month.
