GEP Index: Global Manufacturing Activity Jumped In May
The GEP Global Supply Chain Volatility Index indicates shortages, transportation costs, backlogs, inventories and demand conditions across global supply chains.
This is tracked via a monthly survey of 27,000 businesses, businesses which are reporting reduced supply chain volatility. For the first time since March 2023, the index has entered positive territory, indicating that supply chains are busy and global manufacturers are operating at capacity.
Demand for commodities, components and raw materials is also accelerating, indicating positive economic prospects for the second half of 2024.
“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, of 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.”
- Global item supply remains robust, with reports of shortages at low levels.
- The inventory cycle has stabilised, with firms neither building up stocks excessively nor aggressively destocking to improve cash flow and cut costs.
- The frequency at which global suppliers reported a rise in their backlogs due to labour 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.
- Global transportation costs remain stable, close to historically typical levels.
- 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.
- Global transportation costs remain stable, close to historically typical levels.
The results of June’s GEP Index demonstrate further manufacturing recovery for Europe, as market slack rapidly shrinks.
The Index also highlights the growth in factory purchasing across East and South Asia, where nations including China, India and South Korea are seeing factory purchasing rise at the fastest rates since December 2021.
The Index also highlights a stretch in capacity for suppliers to North America, partly reflecting supportive demand conditions for businesses based in Mexico and the US.
Ultimately, supply chain conditions going into the rest of 2024 look promising, with notable improvements across the UK and the wider European market. As global manufacturing demand continues to grow, we may see further positive results.
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