The GEP Global Supply Chain Volatility Index fell to -0.37 in August, its lowest level year-to-date, signaling the highest level of spare capacity at global suppliers in 2024. This indicates two consecutive months of underutilized capacity across the world’s supply chains and the lowest level of input demand in eight months. North America experienced the most significant slowdown, with the region’s manufacturers recording the greatest level of unused capacity since June 2023.
Manufacturers Draw Down Inventory Amid Economic Uncertainty
Manufacturers are aggressively drawing down their inventory, suggesting preparation for a sustained period of economic softness. To prevent a significant slowdown in the second half of the year, manufacturers are calling for lower interest rates and a halt to the escalation of tariffs and trade barriers.
Key Points:
- Spare capacity across Asian supply chains for the first time since March, driven by weakened procurement activity in China.
- Europe’s manufacturing recession continues to impact supply chains, with Germany and France leading the downturn.
- Global demand for raw materials and other necessary components shrank in August at an accelerated pace.
- Safety stockpiling reduced significantly as firms targeted cost savings and lean inventory management amid softening economic conditions.
- Reports of item shortages fell for a second successive month due to weaker demand boosting vendor stock levels.
- Manufacturers’ backlogs due to insufficient staffing capacity were muted in August, indicating that labor supply is generally capable of meeting demand.
- Global transportation costs, although slightly higher than their long-term average, cooled slightly in August.