U.S. MANUFACTURING PICKED UP IN JANUARY DRIVEN BY GROWING DEMAND: GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX

Rhea-AI Summary

Global supply chains are operating at full capacity as of January 2025, with the GEP Global Supply Chain Volatility Index posting -0.21. U.S. manufacturing showed significant growth, while Asia's manufacturing expansion was led by South Korea, China, and India. However, Europe remains in an industrial recession.

Key findings include increased procurement activity in North America (driven by U.S. manufacturers), while Mexican and Canadian factories reduced purchasing. Material shortages are at a five-year low, though labor shortages are causing backlogs. Transportation costs reached a six-month high in January.

Regional indices show: North America at -0.22 (six-month high), Europe declining to -0.61, UK falling to -0.63 (13-month low), and Asia rising to 0.03. Despite potential tariffs, global manufacturers are not stockpiling inventories, instead taking a wait-and-see approach while accelerating China-plus-one investments.

Positive

• U.S. manufacturing procurement activity increased significantly
• Material shortages at five-year low indicating well-stocked suppliers
• Strong manufacturing growth in major Asian exporters (South Korea, China, India)
• Global supply chains operating at full capacity

Negative

• European manufacturing remains in prolonged recession
• Transportation costs rose to six-month high
• Growing labor shortages causing factory backlogs
• UK manufacturing outlook weakening (13-month low index)
• Mexican and Canadian factories showing reduced procurement activity

Insights

Supply Chain and Manufacturing Analytics Expert

The latest GEP Global Supply Chain Volatility Index presents a complex picture of global manufacturing dynamics that directly impacts S&P Global's market intelligence business. The index reading of -0.21 reveals several critical trends that warrant careful analysis.

The divergence between regions is particularly telling:

• U.S. manufacturing shows renewed vigor with increased procurement activity, despite representing only 12% of GDP
• Asian markets, particularly China, India, and South Korea, demonstrate robust growth and optimal capacity utilization
• European manufacturing continues its protracted recession, with significant spare capacity across major economies

The absence of preventive inventory building, despite looming tariff threats, represents a significant shift in global manufacturing strategy. This 'wait-and-see' approach, combined with the acceleration of China-plus-one strategies, signals a fundamental transformation in global supply chain risk management. The reported five-year low in material shortages, coupled with rising transportation costs, suggests a rebalancing of supply chain dynamics.

A particularly concerning trend is the emerging labor shortage amid declining global factory employment. This paradox indicates potential structural changes in manufacturing labor markets that could drive automation adoption and reshape global production patterns. The rise in factory backlogs due to inadequate labor supply could accelerate this transition.

For S&P Global, these trends reinforce the critical importance of their market intelligence services. The complex interplay of regional manufacturing performance, labor dynamics, and supply chain strategies increases demand for sophisticated data analytics and market insights. The company's ability to track and analyze these patterns through indices like the GEP Global Supply Chain Volatility Index strengthens their market position in the financial information services sector.

• The world's supply chains are operating at full capacity, with the notable exception of Europe, which remains in a protracted industrial recession.
• Asia's manufacturing growth was reported by major exporters, led by South Korea, China, and India.
• Despite the possibility of tariffs and significant uncertainty surrounding their implementation, global manufacturers are not stockpiling inventories.

CLARK, N.J., Feb. 12, 2025 /PRNewswire/ -- 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 — posted -0.21 at the start of the year. This indicates that global supply chains are effectively at full capacity, signaled when the index hits 0.

"January's rise in manufacturers' procurement across APAC and the U.S. signals steady growth ahead in Q1," said John Piatek, GEP's vice president of consulting. "Globally, companies are largely taking a wait-and-see approach to tariffs rather than absorbing the immediate cost of increasing buffer inventories. However, many Western firms are accelerating China-plus-one investments to diversify and near-shore manufacturing, assembly, and distribution. European manufacturers are especially vulnerable, as the sector has been contracting for nearly two years with no turnaround in sight. In the U.S., where manufacturing represents just 12% of GDP, the bigger concern for business is the potential revenue losses in China because of trade tensions."

A key finding in January was the marked increase in procurement activity across North America. This increase was entirely driven by U.S. manufacturers, as purchasing managers at Mexican and Canadian factories sanctioned procurement cutbacks, indicating a darkened near-term outlook there.

In Asia, many major producers in the region bolstered their demand for inputs to meet growing production needs, led by China and India. South Korea, in particular, reported a marked pickup in January.

By contrast, Europe's industrial economy continues to struggle, with our data indicating still-significant levels of spare capacity across the continent's supply chains. Factories in Germany, France, Italy, and the U.K. held back on material purchases in January, implying that Europe's manufacturing recession is set to persist a while longer.

The Global Supply Chain Volatility Index data was captured just prior to the U.S. administration's announcement of tariffs on China, as well as the initial announcement (and subsequent pause) of tariffs on Mexico and Canada.

Interpreting the data:
Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

JANUARY 2025 KEY FINDINGS

• DEMAND: After some pullback in the second half of 2024, global manufacturers' purchasing of raw materials is slowly recovering. In fact, global factory procurement in Asia is in line with its average, while in North America (driven by the U.S.), input purchasing is trending upward. This contrasts with the situation in Europe, which remains depressed as the region's industrial sector struggles to break out from its prolonged downturn.
  
  
• INVENTORIES: Global manufacturers' desire to safety stockpile remains contained. Reports from factories surveyed showing an increase in inventory levels due to concerns about price or supply were low in January.
  
  
• MATERIAL SHORTAGES: Reports of shortages for the globe's most critical items, such as commodities, electronic components, chemicals and food products, were at their lowest in five years during January. This suggests that suppliers remain well stocked, indicating there are minimal frictions for companies obtaining necessary materials.
  
  
• LABOR SHORTAGES: Global factory employment levels have been shrinking for several months¹ and it appears that the growing labor shortage is now preventing global suppliers from completing orders as quickly. There was a rise in reports of factory backlogs rising due to inadequate labor supply in January.
  
  
• TRANSPORTATION: Global transportation costs are increasing. In January, they rose to their highest level in six months.

REGIONAL SUPPLY CHAIN VOLATILITY

• NORTH AMERICA: Index up to -0.22, from -0.53, a six-month high, suggesting a pick-up in procurement across the region at the start of the year.
• EUROPE: Index down to -0.61, from -0.49, suggesting that activity levels across Europe's supply chains remain weak.
• U.K.: Index fell to -0.63, from -0.41 in December, a 13-month low and signaling a weaker outlook for 2025 for U.K. manufacturing.
• ASIA: Index rises to 0.03, from -0.09, indicating that suppliers to the region are generally 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, Mar. 12, 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.

Disclaimer

The intellectual property rights to the data provided herein are owned by or licensed to S&P Global and/or its affiliates. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without S&P Global's prior consent. S&P Global shall not have any liability, duty or obligation for or relating to the content or information ("Data") contained herein, any errors, inaccuracies, omissions or delays in the Data, or for any actions taken in reliance thereon. In no event shall S&P Global be liable for any special, incidental, or consequential damages, arising out of the use of the Data. Purchasing Managers' Index™ and PMI^® are either trade marks or registered trade marks of S&P Global Inc or licensed to S&P Global Inc and/or its affiliates.

This Content was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global. Reproduction of any information, data or material, including ratings ("Content") in any form is prohibited except with the prior written permission of the relevant party. Such party, its affiliates and suppliers ("Content Providers") do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such Content. In no event shall Content Providers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of the Content.

Media Contacts
Derek Creevey Director, Public Relations GEP Phone: +1 646-276-4579 Email: derek.creevey@gep.com	Joe Hayes Principal Economist S&P Global Market Intelligence Phone: +44-1344-328-099 Email: joe.hayes@spglobal.com	S&P Global Market Intelligence Corporate Communications Email: Press.mi@spglobal.com

¹ Source: The S&P Global PMI survey, which encompasses the GEP Global Supply Chain Volatility Index

View original content to download multimedia:https://www.prnewswire.com/news-releases/us-manufacturing-picked-up-in-january-driven-by-growing-demand-gep-global-supply-chain-volatility-index-302372691.html

SOURCE GEP

FAQ

What does the GEP Global Supply Chain Volatility Index of -0.21 in January 2025 indicate?

The index reading of -0.21 indicates that global supply chains are effectively operating at full capacity, as readings close to 0 signal full capacity utilization.

How are European manufacturing supply chains performing in early 2025?

European manufacturing supply chains are struggling with significant spare capacity, showing continued recession with an index declining to -0.61, affecting major economies including Germany, France, Italy, and the UK.

What is the current state of material shortages in global supply chains?

Material shortages for critical items (commodities, electronic components, chemicals, food products) are at their lowest level in five years, indicating well-stocked suppliers.

How are manufacturers responding to potential tariffs on China?

Manufacturers are taking a wait-and-see approach rather than stockpiling inventories, while accelerating China-plus-one investments to diversify and near-shore manufacturing operations.

What is the trend in global transportation costs as of January 2025?

Global transportation costs have increased to their highest level in six months as of January 2025.