- Index breaks into positive territory for the first time in
14 months as global manufacturers report stretched
capacity
- Demand for raw materials, commodities and components
accelerates, a positive indicator for the rest of 2024
- Factory purchasing in Asia
rising at the fastest rate since December
2021, driven by India,
China and South Korea
- Slack in European markets rapidly shrinking, indicating an
advancement of the region's manufacturing recovery
- Global reports of order backlogs rising because of staff
shortages at their highest since late 2022, signaling future price
pressures
CLARK,
N.J., June 13, 2024 /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 — increased notably in May to 0.21, from -0.18 in April.
Crucially, this was the first time since March 2023 that the index is in positive
territory, signaling that global vendors are working at capacity
and that supply chains are at their busiest for more than a
year.
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.
A key factor behind the index's increase in May was a further
improvement in global manufacturing demand, leading factories to
ramp up their purchases of raw materials, commodities and
components. Purchasing growth was especially strong in Asia, particularly in key exporting countries
such as China, India and South
Korea.
Suppliers to North America also
got busier during May, with their capacity slightly stretched as a
result. This partly reflected more supportive demand conditions for
businesses in the U.S. and Mexico.
The European market, which has been a laggard since mid-2022,
improved notably, especially in the U.K.
Globally, reports of backlogs increasing because of staff
shortages at suppliers of critical goods and inputs hit their
highest in almost a year-and-a-half in May, suggesting capacity
expansion is required to meet existing and future orders. Overall,
this paints an optimistic picture for the outlook in H2 2024 for
global supply chains.
"The broad-based nature of the breakout we're seeing in May is a
hugely encouraging sign for the global economy going into the
second half of 2024," explained Mudit
Kumar, vice president, GEP Consulting. "If this trend
continues, businesses can expect renewed efforts by vendors to
raise prices, especially given the recent surge in the cost of many
commodities."
MAY 2024 KEY FINDINGS
- DEMAND: Global demand for raw materials, commodities and
components is now trending in line with its long-term average,
indicating that global manufacturing is now moving toward an
upswing in the business cycle. At the forefront of growth is
Asia, led by China, India
and South Korea.
- INVENTORIES: The inventory cycle has stabilized, with
firms neither building up stocks excessively nor aggressively
destocking to improve cash flow and cut costs.
- MATERIAL SHORTAGES: Global item supply remains robust,
with reports of shortages at low levels.
- LABOR SHORTAGES: The frequency at which global suppliers
reported a rise in their backlogs due to labor shortages was at its
greatest in nearly a year-and-a-half, indicating that capacity
expansion is required to sustainably meet current and future
demand.
- TRANSPORTATION: Global transportation costs remain
stable, close to historically typical levels.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: Index
rose to 0.09, from -0.30, its highest since February. May data
showed stronger demand from manufacturers in the U.S. and
Mexico, exerting more pressure on
North American suppliers.
- EUROPE: Index rose
to -0.13 from -0.55, a 14-month high and signaling a substantial
reduction in slack across Europe's
supply chains. This suggests the region's manufacturing downturn
continues to recede.
- U.K.: Index rose to 0.15, from -0.47. This showed
increased capacity pressures at U.K. suppliers for the first time
since January 2023.
- ASIA: Index rose to
0.19, from 0.07. Suppliers to Asia
are the busiest globally because of particularly strong demand
pressures arising from major markets such as China, India
and South Korea.
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, July 12, 2024.
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 550 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
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Media Contacts
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Economist
|
GEP
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