GEP Index: Manufacturers Cutting Back on Material Purchasing

Manufacturers across major economies are pulling back on raw material and component purchasing as global supply chains show signs of easing pressure.

According to the GEP Global Supply Chain Volatility Index, a monthly economic indicator built on input from 27,000 companies, input demand in October shows the steepest decline since May.

The index measures global supply chain capacity based on six core metrics: demand conditions, shortages, transportation costs, inventories and backlogs.

In October, the index registered –0.33, confirming underutilisation of global supply capacity. The data suggests manufacturers are deliberately scaling down procurement and focusing on leaner inventory management.

This behaviour was particularly visible in North America where earlier stockpiling activity, prompted by tariffs introduced in early 2025, is reversing. A shift was also visible in Asia, while Europe continues to operate well below full manufacturing capacity.

North American manufacturers rein in purchasing

North America saw the sharpest decline in the index, dropping from –0.25 to –0.45 in October. This marks the lowest reading since March and reflects widespread underuse of supply capacity across the region.

After several months of tariff-driven stockpiling, firms in the region reported a clear slowdown in procurement and a deliberate drawdown of inventories. The shift points towards reduced production output heading into the winter months. As businesses wind down excess stock and cut back on new purchases, supply chains are easing further from the capacity strains experienced earlier in the year.

Michael DuVall, Global Head of Supply Chain Strategy at GEP, says: "North America is seeing the clearest sign yet of a manufacturing pullback. Manufacturers are buying less and working down inventories, which points to weaker production through the winter.

"With space capacity across global supply we do not anticipate any price pressure, beyond tariffs, on buyers."

Procurement activity across factories in China also cooled in October, dragging down the index for Asia from –0.06 to –0.30. While India maintained stronger levels of purchasing, the region overall showed greater slack in manufacturing and logistics capacity. This softening indicates that Asia's supply chains have more available bandwidth compared to earlier in the year.

Europe lags as industrial recovery stalls

Europe showed a slight rise in activity but remains far from full capacity. The index increased to –0.25 from –0.53, suggesting some stabilisation but still indicating spare capacity.

Manufacturers in Germany, France, Italy and the UK continued to curb input purchasing, showing restraint in procurement and signalling that the region’s recovery from its long industrial slowdown is still muted.

The UK saw the sharpest decline in activity across Europe, with its index dropping from –0.57 to –0.80 in October, revealing a notable drop in supplier activity. The data highlights a pullback in factory orders, further reinforcing that output remains subdued.

Inventory levels remain low across global markets, with procurement managers reporting minimal stockpiling motivated by price or supply risks, signalling limited concern around inflationary pressure or shortages in the short term. Most manufacturers continue to operate lean warehouses, avoiding overstocking and maintaining efficient material flow.

October’s data also reveals that global item shortages were well below the historical trend, showing stable supply levels for raw materials, components and intermediate goods. Labour-related supply constraints edged up slightly, with a minor rise in backlog reports due to staff shortages. However, labour availability was only marginally tighter than average and capacity bottlenecks remained limited.

Transportation costs also eased in October, sitting just below long-term averages. This contributes further to the overall picture of stable, underused supply chain infrastructure.

Understanding GEP's index

The GEP Global Supply Chain Volatility Index is produced in collaboration with S&P Global. It draws on purchasing managers’ index (PMI) survey data from 27,000 businesses across multiple industries. The index aggregates six sub-indices that track demand, inventory trends, transportation costs, commodity availability and supply constraints.

Positive readings on the index indicate stretched supply chains and growing volatility. A higher figure means capacity is under pressure and supply chains are closer to breaking points. Negative values show underused capacity and lower volatility, with the further below zero the figure drops, the greater the slack in the system.

The October reading of –0.33 highlights a clear trend: global manufacturers are easing off procurement, inventories are lean, supply availability is healthy and production is slowing. For manufacturers and procurement leaders, the index acts as a signal of the current balance between input demand and supply chain flexibility.

As of October, the balance tilts toward underutilisation. With global suppliers operating below capacity and manufacturers limiting purchases, the outlook remains one of caution and efficiency rather than expansion.