Supply Chain Spare Capacity Increases for 3rd Consecutive Month: GEP Index

The GEP Global Supply Chain Volatility Index decreased in September to -0.43 (August: -0.37), its lowest level in 14 months and indicating the greatest level of global supply chain spare capacity since July 2023.

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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 — decreased in September to -0.43 (August: -0.37), its lowest level in 14 months and indicating the greatest level of global supply chain spare capacity since July 2023.

"September is the fourth straight month of declining demand and the third month running that the world's supply chains have spare capacity, as manufacturing becomes an increasing drag on the major economies," explains Jagadish Turimella, president, GEP. "With the potential of a widening war in the Middle East impacting oil, and the possibility of more tariffs and trade barriers in the new year, manufacturers should prioritize agility and resilience in their procurement and supply chains."

Key Takeaways:

  • The rise in underutilized vendor capacity was driven by a further deterioration in global demand. Factory purchasing activity was at its weakest in the year-to-date, with procurement trends in all major continents worsening in September and signaling gloomier prospects for economies heading into Q4.
  • Notably, supplier spare capacity shot up again in North America. U.S. manufacturers lowered their purchasing volumes aggressively in September, with a slowing of the U.S. economy denting factory orders.
  • In Asia, supply chain spare capacity also rose to a year-to-date high. Slowing economic conditions in other parts of the globe led factory procurement activity in China to fall for a third straight month in September. There was also the devasting impact of Typhoon Yagi across Southeast Asia. Vietnam was affected in particular, causing vendor supplying this part of the region to suffer as a result. Europe's industrial recession intensified, reflecting the blight of major manufacturers in the continent due to macro factors like competitive pressures from China, high energy costs and a flagging eurozone economy.  


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