**Europe**: The GEP Global Supply Chain Volatility Index shows that while global supply chains are near full capacity, Europe struggles with an industrial recession, particularly impacting manufacturers in Germany, France, Italy, and the UK, with a concerning drop in the Index value reflecting ongoing challenges.
The GEP Global Supply Chain Volatility Index has revealed that while global supply chains are operating at near full capacity, Europe is facing a significant industrial recession. The Index, which tracks factors such as demand conditions and transportation costs based on a survey of 27,000 businesses, recorded a value of -0.21, indicating that supply chains are largely at full capacity, particularly in regions such as Asia and North America.
John Piatek, vice president of consulting at GEP, noted that the rise in manufacturers’ procurement across Asia-Pacific and the United States suggests a steady growth trajectory for the first quarter of 2025. “Globally, companies are largely taking a wait-and-see approach to tariffs rather than absorbing the immediate cost of increasing buffer inventories,” he explained. He further highlighted that Western companies are increasingly looking to diversify their manufacturing operations away from China due to trade tensions, with European firms particularly in a vulnerable position after nearly two years of contraction.
Despite increases in procurement activity in North America, driven by U.S. manufacturers, other regions are not faring as well. Factories in Mexico and Canada have reportedly implemented procurement cutbacks, suggesting a more negative outlook for those countries. In Asia, manufacturers in major economies such as China and South Korea have ramped up production needs, aligning procurement levels with their average historical performance.
Conversely, Europe’s industrial sector continues to struggle, with factories across Germany, France, Italy, and the UK holding back on material purchases, indicating a prolonged downturn. In the UK specifically, the Index fell to -0.63, marking a 13-month low and signalling a weakening outlook for manufacturing in 2025.
The report also highlighted that while demand for essential materials is recovering globally, manufacturers are resisting the urge to stockpile inventories. Reports of material shortages have reached their lowest levels in five years, suggesting that suppliers are well stocked. However, global factory employment levels continue to decline, leading to increased backlogs due to inadequate labour supply. Furthermore, transportation costs have risen to their highest levels in six months, adding further complexity to the supply chain environment.
The data collected for the GEP Global Supply Chain Volatility Index occurred before the recent announcements regarding new tariffs on China and a pause on tariffs for Mexico and Canada.
Source: Noah Wire Services
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