A new report from the S&P Global and GEP indicates the global supply chain is operating at near maximum capacity signaling a steady outlook for manufacturing.
According to the GEP Global Supply Chain Volatility Index, an indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs, global supply chains are operating at close to full capacity, rising in April to 0.18 from -0.32 in March.
Officials said the improved activity is a direct result of healthier demand, which has picked up consistently after weakness in 2023. At the forefront of the trend is the Asian market, with input demand at the region’s factories remaining strong. Procurement managers in South Korea, Vietnam, India and China all reported greater purchasing activity in the last month.
Additionally, the North American market is exhibiting signs of tightening capacity, with backlogged work reported by manufacturers. Demand for raw materials, commodities and components are also improved, while remaining somewhat subdued, officials said.
“After four years of supply shocks, inflation, stockpiling, and uncertainty, global supply chains are now operating in a Goldilocks zone, a steady state of full capacity, not expanding or contracting too quickly, which is excellent news for global suppliers and business,” Mike Seitz, vice president, GEP Consulting, said. “In China, we’re seeing a steady pick-up in manufacturing activity, which will encourage Chinese Premier Li Qiang to accelerate efforts to remove barriers imposed by European markets and foster more FDI, especially as the potential for tougher U.S. tariffs and trade policies loom.”
The Index found that inventory drawdowns persisted into April and that reports from global businesses of stockpiles rising were among the lowest seen in more than four years. Material shortages also persist, with semiconductors, foodstuff, chemicals and metals hitting historic lows. The index also found that reports of backlogged orders rising due to staff shortages fell in April, with some regional North American exceptions. And increases in oil prices were causing global transportation costs to rise for the first time, officials said.