NORTH AMERICAN MANUFACTURERS REPORT SHARP PULLBACK DUE TO TARIFFS, WHILE ASIAN SUPPLIERS RUN AT FULL TILT: GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX

Rhea-AI Summary

The GEP Global Supply Chain Volatility Index revealed significant disruptions in global manufacturing for March 2025, with spare capacity reaching its highest level since May 2020. The index dropped to -0.51, marking its third consecutive monthly decline.

Key findings include:

• North American manufacturers faced severe retrenchment due to tariffs, with Canada experiencing the steepest decline in purchasing activity
• UK suppliers showed significant weakness, with spare capacity rising to levels only exceeded during COVID-19 or the global financial crisis
• European supply chains showed signs of recovery despite significant slack
• Asian supply chains operated at full capacity, with China and India driving regional procurement activity

Notable trends include manufacturers' stockpiling reaching a nine-year low and transportation costs falling to their lowest in 2025. The data indicates robust global material supply levels, contained labor shortages, and significant geographical differences in factory input demand.

Positive

• Asian supply chains operating at full capacity with growth in China and India
• Signs of recovery emerging in European industrial sector
• Robust global material supply levels
• Transportation costs at yearly low
• Contained labor shortages with no significant processing constraints

Negative

• Severe decline in North American manufacturing due to tariffs
• UK supplier activity at near crisis levels
• Manufacturer stockpiling at nine-year low
• Third consecutive monthly decline in global supply chain index
• Significant geographical disparities in factory input demand

• In March, global supply chains spare capacity increased to highest level since May 2020, the height of the COVID-19 pandemic, indicating rapidly worsening conditions for global manufacturers
• Factories in the U.S., Mexico and Canada retrenched sharply in March due to tariffs, with purchasing activity down the most in Canada
• UK supplier activity contracting at a rate that has only ever been surpassed twice previously in the last 25 years, signaling considerable manufacturing weakness

CLARK, N.J., April 10, 2025 /PRNewswire/ -- 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 for a third successive month in March to -0.51 and posted its lowest value in almost five years, indicating the highest degree of spare capacity across global supply chains since the height of the COVID-19 pandemic in 2020.

A key finding from GEP's latest data was a sharp decline in the number of companies building buffers into their stocks. Overall, manufacturers' stockpiling was the lowest in nine years, highlighting caution among procurement leaders worldwide about future demand.

"March's sharp decline in supplier activity was due to the stifling effect of tariffs and tariff-related uncertainty, which had its strongest impact in North America, where manufacturers reported cutbacks to purchasing activity and inventories," said John Piatek, vice president, consulting GEP. "Until just last week, most companies had taken a wait-and-see approach. Now, organizations are aggressively exploring every possible way to eliminate costs, push suppliers to absorb tariffs, and de-risk their global supply chains."

In the U.K., supplier spare capacity rose for the fourth month in succession to a level that has only been surpassed during either the COVID-19 pandemic or global financial crisis period. U.K. factories aggressively destocked and reduced spending during March, suggesting the country's industrial sector is bracing for a downturn.

Our data showed significant slack across European supply chains in March, although in contrast to the U.K., there were budding signs of recovery for the continent's industrial sector as demand for raw materials, commodities and components were down by the softest margin in almost three years.

Meanwhile in Asia, supply chains are broadly running at full capacity. In March, there was even a slight uptick in regional procurement activity, driven by China and India.

Interpreting the data:
Index > 50 means growth. The further above 50, the faster the growth
Index < 50 means decreasing. The further below 50, the larger the contraction.

MARCH 2025 KEY FINDINGS

• DEMAND: Our indicator, which tracks global demand for raw materials, components and commodities, was broadly unchanged during the month and therefore remained close to its long-term average, signaling global purchasing activity was near its historical trend. There remains considerable geographical differences, however, with a worsening of factory input demand in North America contrasting with some pick-up in Europe and Asia.
  
  
• INVENTORIES: Reports of safety stockpiling from manufacturers across the globe decreased in March to their lowest since July 2016 as procurement managers show a strong reluctance to add to their inventories. The data continues to point to the adoption of a "wait-and-see" mentality among buyers as uncertainty regarding worldwide trade conditions remains rife.
  
  
• MATERIAL SHORTAGES: Our global item shortages indicator, which tracks the availability of critical commodities, common inputs and components, remains below its long-term average, signaling robust global material supply levels. This metric implies that vendors have stock to meet orders from their customers.
  
  
• LABOR SHORTAGES: Reports of labor shortages remained contained. Companies are not struggling to process workloads due to staff capacity constraints, according to our backlogs tracker.
  
  
• TRANSPORTATION: Global transportation costs fell to their lowest in the year-to-date. Overall, they were close to their long-term average level in March.

REGIONAL SUPPLY CHAIN VOLATILITY

• NORTH AMERICA: Index at -0.63, down severely from -0.18, signaling a sharp rise in spare capacity across North American supply chains. U.S., Canadian and Mexican manufacturers retrenched in March.
  
  
• EUROPE: Index ticks up to -0.63, from -0.72, pointing to a still-high level of underutilization across European supply chains. Tentative signs of recovery emerge, however, as weakness in input demand recedes.
  
  
• U.K.: Index slumps to -1.23, a near five-year low, from -0.85, with U.K. procurement managers significantly reducing buying and inventories as the country's economy shows signs of slowing.
  
  
• ASIA: Index at -0.12, down from 0.00 in February. Overall, Asian supply chains are broadly operating at full capacity.

For more information, visit www.gep.com/volatility.
Note: Full historical data dating back to January 2005 is available for subscription. Please contact economics@spglobal.com.
The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, May. 13, 2025.

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 over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.

• A value above 0 indicates that supply chain capacity is being stretched and supply chain volatility is increasing. The further above 0, the greater the extent to which capacity is being stretched.
• A value below 0 indicates that supply chain capacity is being underutilized, reducing supply chain volatility. The further below 0, the greater the extent to which capacity is being underutilized.

A Supply Chain Volatility Index is also published at a regional level for Europe, Asia, North America and the U.K. For more information about the methodology, click here.

About GEP
GEP^® delivers AI-powered procurement and supply chain solutions that help global enterprises become more agile and resilient, operate more efficiently and effectively, gain competitive advantage, boost profitability and increase shareholder value. Fresh thinking, innovative products, unrivaled domain expertise, smart, passionate people — this is how GEP SOFTWARE™, GEP STRATEGY™ and GEP MANAGED SERVICES™ together deliver procurement and supply chain solutions of unprecedented scale, power and effectiveness. Our customers are the world's best companies, including more than 1,000 Fortune 500 and Global 2000 industry leaders who rely on GEP to meet ambitious strategic, financial and operational goals. A leader in multiple Gartner Magic Quadrants, GEP's cloud-native software and digital business platforms consistently win awards and recognition from industry analysts, research firms and media outlets, including Gartner, Forrester, IDC, ISG, and Spend Matters. GEP is also regularly ranked a top procurement and supply chain consulting and strategy firm, and a leading managed services provider by ALM, Everest Group, NelsonHall, IDC, ISG and HFS, among others. Headquartered in Clark, New Jersey, GEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.

About S&P Global
S&P Global (NYSE: SPGI) S&P Global provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world. We are widely sought after by many of the world's leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world's leading organizations plan for tomorrow, today.

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FAQ

What is the current state of global supply chain capacity according to the March 2025 GEP index?

Global supply chains reached their highest spare capacity since May 2020, with the index falling to -0.51, indicating rapidly worsening conditions for global manufacturers.

How are tariffs affecting North American manufacturing in March 2025?

Tariffs caused sharp retrenchment in U.S., Mexican, and Canadian manufacturing, with Canada experiencing the most significant decline in purchasing activity.

What are the key differences between Asian and European supply chains in March 2025?

Asian supply chains are running at full capacity with increased activity in China and India, while European chains show significant slack but with emerging signs of recovery.

How has manufacturer stockpiling behavior changed according to the March 2025 report?

Manufacturer stockpiling reached its lowest level in nine years, indicating strong caution among procurement leaders about future demand.

What is the current state of UK supplier activity in March 2025?

UK supplier activity contracted to near five-year lows (-1.23 from -0.85), with levels only surpassed twice in the last 25 years, indicating considerable manufacturing weakness.