More green shoots in global manufacturing finds GEP Index

Purchase orders, backlogs and demand for inputs all on the up in good sign for global factories and supply chains

GEP’s Global Supply Chain Volatility Index is now in positive territory for the first time since March 2023 – 14 months ago – underlining an improving demand situation among major economies.

The score of +0.21 in May was up from -0.18 in April and indicates that that slack capacity in manufacturing and supply chains has fallen, more assets are being employed productively and that potentially expansion is required to meet demand.

Notably, the Index measured that backlogs due to staff shortages at suppliers reached their highest point in nearly a year-and-a-half in May.

Combined with what appears to be a shifting trend from destocking to building up stockpiles, and the Index seems to be indicating that there now appears to be positive momentum in global manufacturing and supply chains, after a prolonged period of weak demand.

Survey researchers noted that this turnaround was broad-based, but highlighted that factory purchasing in Asia-Pacific rose at its fastest rate since December 2021, led by regional powerhouses India, China and South Korea, making it the centre of recovery.

They also saw what appears to be a turnaround in European fortunes, which has been the market facing the most prolonged slump, stretching back to 2022. The UK Index score moved into positive territory for the first time since January 2023, indicating that capacity expansion is required and Europe as a whole improved, with GEP noting in a release that slack in the European market was rapidly shrinking, although the score remained in overall negative territory at -0.13.

Measures of activity from other indices support a picture of improving manufacturing and supply chain demand, but it is uneven.

While manufacturing PMIs in China, Japan and South Korea were at their highest for 12 months or more, and Eurozone economies seemed to be heading towards recovery, in the US the ISM manufacturing index fell in June and deliveries of distillate fuel, which can act as a proxy for logistics demand, were at their lowest levels in March since 1998.

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