#United States #North America #Supply Chain #Clark #GEP Index

North American Manufacturers Cut Orders in October

In a recent release from GEP, the Global Supply Chain Volatility Index indicated that manufacturers across North America have significantly reduced their orders for raw materials and intermediate goods. The data, gathered from a monthly survey of 27,000 businesses worldwide, reveals that this marked decline in purchasing during October is the sharpest observed since May 2025, suggesting a potential cooling in production activities in the forthcoming months.

The current state of global supply chains is notable as it exhibits ample spare capacity, thereby diminishing the threat of goods price inflation, aside from tariff impacts. As manufacturers trim down their inventories and purchasing activities, it creates an environment that’s more sustainable for buyers in terms of pricing.

Key Insights from the GEP Index

The GEP Global Supply Chain Volatility Index posted a reading of -0.33 for October. This number indicates that supply chain capabilities globally remain largely underutilized. With many manufacturers leaning toward maintaining minimal inventories, a trend that seems to be a key strategy in times of economic uncertainty continues to impact their purchasing behaviors.

North American Perspective
In North America, the downturn in orders follows a period of stockpiling earlier in the year, driven primarily by tariffs. Manufacturers in this region reported notable reductions both in their acquisition of materials and in their efforts to build up inventories. This has relieved some of the pressure on supply chains that are now operating well below their full potential. As a result, organizations are gearing up for a more subdued production outlook through the winter months.

Regional Supply Chain Highlights

• - Asia: The index dropped to -0.30, reflecting greater unused capacity due to a decrease in purchasing activities by Chinese manufacturers, which outweighs the continued strength observed in India.
• - North America: The index fell to its lowest point since March at -0.45, demonstrating a significant underutilization of supply chain resources, the most profound since April's initial tariff announcements.
• - Europe: A modest recovery is noted, with the index rising marginally to -0.25, hinting at continued challenges in the region’s manufacturing rebound.
• - United Kingdom: The index sharply declined to -0.80, indicating reduced manufacturing activity.

Demand and Purchasing Trends

The rapid reversal of demand following September’s notable surge in factory purchasing suggests weaker procurement sentiment across major economies, including China and the United States. This downturn points to a muted outlook for producers in the near future. Manufacturers are primarily concerned about avoiding excess inventory in a market that feels increasingly uncertain.

Inventory and Material Shortages

Reports concerning stockpiling due to anticipated price hikes or supply shortages remain exceedingly low, showcasing limited apprehension among manufacturers regarding price inflation or shortages. Continued preferences for lean inventory management suggest firms are confident in their ability to source necessary materials without significant challenges.

Labor and Transportation Considerations

While there was a slight uptick in labor-related capacity challenges in October, the overall labor shortages tracker remains relatively stable, only slightly above its historical trends. Additionally, global transportation costs have shown slight declines, remaining close to historical averages, which may alleviate some cost pressures for manufacturers.

Overall, the GEP Global Supply Chain Volatility Index underscores critical shifts within North American manufacturing and its ripple effects across global supply chains, revealing a transitional phase characterized by restrained purchasing and underutilized capacity. As we move forward into the winter months, manufacturers are adapting to a landscape where cost control and efficiency will be paramount. Companies must navigate this evolving issue with strategic foresight as they balance production capabilities with demand fluctuations.