The latest data from the GEP Global Supply Chain Volatility Index reveals a troubling decline in global manufacturers’ purchases, signalling a likely production slowdown ahead. The index, which analyses various aspects of global manufacturing, including demand conditions, shortages, transportation costs, inventories, and backlogs through the input of 27,000 businesses, shows an accelerated reduction in demand for inputs across the board. This downturn is most pronounced in North America, where manufacturers are responding to tariffs by buying fewer materials and stockpiling, indicative of an increasingly cautious approach to upcoming production demands.
Particularly striking is the data from April 2025, which highlights the sharpest decrease in purchasing across global manufacturers this year, especially in North America. This contraction aligns with an overall slowdown across Asian manufacturers, who have reported their weakest purchasing activity since December 2023. Observations from industry experts reveal that many major markets in Asia, such as China, Taiwan, and South Korea, are experiencing significant slowdowns, amplifying concerns about the state of the global economy.
As purchasing activity weakens, it raises questions about the broader economic implications. The situation in North America contrasts sharply with Europe, where signs indicate an industrial recession is beginning to lift. The GEP index notes that spare capacity in European supply chains is underutilised to a lesser degree than at any point in the past ten months, reflecting growth in key manufacturing hubs like Germany and France. Nevertheless, lingering risks remain if global trade conditions deteriorate further.
In an insight shared by John Piatek, Vice President of Consulting at GEP, the current situation is critical: “The first blows of the tariff war have landed on global manufacturers. Stockpiling is accelerating at a concerning rate and the first signs of manufacturers anticipating slower demand and supply shortages have emerged.” This sentiment underscores the uncertainty that tariffs are causing in manufacturing strategies worldwide.
As companies in the U.S. grapple with tariffs and subsequent changes in purchasing habits, the ripple effects are being felt across the globe. For instance, China has intensified efforts to localise its supply chains, aiming for industrial self-sufficiency in a bid to contend with the fallout from U.S. tariffs. This strategic shift echoes the country’s long-term objectives under initiatives like “Made in China 2025” and aligns with its “dual circulation” strategy. A variety of industries, from semiconductors to chemicals, are seeing firms innovate solutions to reduce reliance on foreign components.
Despite these efforts from China, the turbulence within the manufacturing sector is also evidenced by a forecast from the World Trade Organization (WTO), which has recently slashed its predictions for global merchandise trade. What was once an anticipated 3% growth for 2025 is now expected to falter into a 0.2% decline. This revision underscores the precariousness fueled by escalating trade tensions and the potential fallout on global GDP, with realistic fears that developing economies will bear the brunt of this decline.
Looking ahead, industrial bodies in Germany indicate cautious expectations, predicting an 8% decline in production for their sector in 2024, with a further fall of 2% expected in 2025. Factors such as shrinking order backlogs and diminished capacity utilization are causing concern over potential job cuts, marking a pervasive trend that could spread to other regions if external economic pressures continue to mount.
In conjunction with these troubling forecasts, the natural rubber market is illustrating its own challenges, with predictions of a production shortfall for the fifth consecutive year in 2025. Major producers are slow to respond to rising demand, leading to escalating costs—further complicating the already fragile landscape for manufacturers reliant on this essential raw material.
Ultimately, as tariffs reshape the manufacturing landscape while economic growth continues to slow, the repercussions of these changes will likely deepen, demanding a concerted response from industry stakeholders and policymakers alike to navigate the turbulent waters ahead.
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Source: Noah Wire Services
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