- Asia suppliers experience the largest increase in spare capacity since June 2020 as the region’s economic resilience fades
- Europe reported a 7 th consecutive months of substantial excess supplier capacity, and 17th consecutive months of subdued demand, reflecting recessionary conditions
- On the other hand, the unused capacities of suppliers in North America is increasing, albeit modestly, highlighting greater economic resilience in the U.S. economy and its divergence from Europe
CLARK, New Jersey, November 16, 2023 /PRNewswire/ — The GEP Global Supply Chain Volatility Index — a leading indicator that tracks demand conditions, shortages, transportation costs, inventories and delays, based on a monthly survey of 27,000 businesses — declined again in October to -0.41, from -0.35 in September, indicating a 7th consecutive month of increasing spare capacity in global supply chains. In addition, the underutilization of suppliers’ capacities was even greater than in September and August. Combined with the slowdown in demand for raw materials, components and commodities seen in October, this reflects growing slack in global supply chains.
“Even if the decline in order books of global suppliers does not worsen, there are no signs of improvement,” explained Jamie Ogilvie-Smals, vice-president, council, GEP. “The notable increase in the capacity of suppliers in Asiawhich was led by Chinaprovides global manufacturers with greater leverage to drive down prices and inventories in 2024.”
One of the key findings of the October report is the largest increase in excess capacity in Asian supply chains since June 2020. Continued weakness in demand, combined with reduced pressure on factories Asia, indicates that the global manufacturing recession is not yet over. With the exception of Indiawhich continues to perform strongly, the region’s large economies, such as Japan And Chinaare losing momentum.
Suppliers in Europe continue to report the highest level of unused capacity. In fact, the lower levels of the GEP Supply Chain Index for the continent were only observed during the global financial crisis between 2008 and 2009. They highlight the continued weakness in economic conditions across the continent. Western Europeparticularly Germany manufacturing industry, is a key factor in the region’s deterioration.
A relatively bright spot is North Americawhere supply chains have excess capacity, but to a much lesser extent than elsewhere, as the US economy continues to demonstrate resilience, in stark contrast to Europe.
OCTOBER 2023 KEY FINDINGS
- REQUEST: Demand for raw materials, components and raw materials remains depressed, although the recession appears to have stabilized. However, there are still no signs of improving conditions, as global purchasing activity fell again in October at a rate similar to what we have seen since mid-year.
- INVENTORIES: With demand falling, our data shows another month of destocking by global companies, signaling efforts to preserve cash flow.
- Material shortages: Reports of item shortages remain at lowest level since January 2020.
- LABOR SHORTAGES: Labor shortages are not impacting the production capacity of global manufacturers, with reported delays due to insufficient labor supply remaining at historically typical levels.
- TRANSPORTATION: Global transportation costs remained stable at September levels, even though oil prices have fallen in recent weeks.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: The index fell to -0.34, from -0.30. This remains well below the global average and continues to suggest that the U.S. economy is poised for a soft landing.
- EUROPE: The index went from -1.01 to -0.90, but still remains at a level indicative of great economic fragility.
- UNITED KINGDOM: The index increased slightly from -0.98 to -0.93. Nonetheless, the data indicates a substantial increase in excess capacity among suppliers to UK markets.
- ASIA: The index notably fell to -0.38, from -0.20, highlighting the largest increase in supplier reserve capacity in Asia Since June 2020 as the region’s resilience fades.
For more information, visit www.gep.com/volatility
Note: Complete historical data dating back to January 2005 is available for subscription. Please contact economy@spglobal.com.
The next version of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, December 14, 2023.
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 more than 40 countries, totaling approximately 27,000 companies. The headline figure is a weighted sum of six subindexes derived from PMI data, PMI commentary trackers, and PMI commodity price and supply indicators compiled by S&P Global.
- A value greater than 0 indicates that supply chain capacity is strained and supply chain volatility is increasing. The higher the value is greater than 0, the more capacity is used.
- A value less than 0 indicates that supply chain capacity is underutilized, reducing supply chain volatility. The lower the value is than 0, the more capacity is underutilized.
A supply chain volatility index is also published at the regional level to Europe, Asia, North America and the United Kingdom. For more information on the methodology, click here.
About GEP
GEP® offers AI-powered sourcing and supply chain solutions that help global businesses become more agile and resilient, operate more efficiently, gain competitive advantage, increase profitability and increase shareholder value .
New thinking, innovative products, unrivaled expertise in the field, smart and passionate people: this is how GEP SOFTWARE™, GEP STRATEGY™ and GEP MANAGED SERVICES™ together offer supply and chain solutions. supply of unprecedented scale, power and efficiency. Our clients are the world’s best companies, including more than 550 Fortune 500 and Global 2000 industry leaders who rely on GEP to achieve ambitious strategic, financial and operational goals.
A leader in multiple Gartner Magic Quadrants, GEP’s cloud-native software and digital business platforms consistently earn awards and recognition from industry analysts, research firms and media, including Gartner, Forrester, IDC, ISG and Spend Matters.
GEP is also consistently ranked among the top sourcing and supply chain consulting and strategy firms, and a leading provider of managed services by ALM, Everest Group, NelsonHall, IDC, ISG and HFS, among others. Based at Clark, New JerseyGEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.
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