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North American and European Manufacturing on the Decline

As we move further into 2026, the manufacturing landscape in North America and Europe exhibits concerning trends. According to the GEP Global Supply Chain Volatility Index, a trusted metric that evaluates conditions across various aspects such as demand, shortages, and transportation costs, factory purchasing has notably declined in December 2025. This conclusion comes from a detailed survey involving 27,000 businesses, which reveals a troubling outlook for manufacturers in these regions.

A Deeper Look into Purchasing Declines

The latest figures show a significant decrease in procurement activities among manufacturers in North America. In fact, December marked the sixth consecutive month of reduced purchasing volumes, indicating a sustained trend of cautious expenditure as companies react to weakening demand. This decline has been pronounced in Mexico, which experienced the steepest contraction of any country in North America.

Conversely, European manufacturers are also facing challenges, particularly in Germany, where purchasing activity has dropped sharply—recording its most considerable fall in nine months. The overall purchasing index for Europe rose just slightly to -0.17, its highest since June 2025, but this increase doesn't stem from any growth in economic activity; rather, it reflects ongoing labor constraints and a deteriorating demand pipeline.

Resilience from Asian Manufacturers

In contrast to the struggles faced by North American and European manufacturers, Asian markets have shown a commendable level of resilience. Countries such as South Korea, Vietnam, and Taiwan reported improved buying activity, and Chinese factories have stabilized their procurement volumes. This regional disparity highlights an essential aspect of the current global manufacturing narrative: while Western markets are grappling with an uncertain future, Asia appears to be climbing a different trajectory.

An Overview of Weak Demand

Global demand for factory inputs like raw materials and intermediate products was notably weak by the close of 2025. The purchasing activity remains most constrained in Western economies, particularly in Germany, where the pressures on purchasing volumes are becoming a significant concern. Reports indicate that North America is similarly affected, particularly as Mexico's downturn weighs heavily on the region as a whole. In stark contrast, Asian manufacturing sectors are thriving even amidst global volatility, showing signs of potential growth not seen in their Western counterparts.

Insights into Supply and Inventory Management

One of the interesting observations from the index is the state of inventories across various regions. There remain reports of stockpiling due to concerns regarding supply chain disruptions or escalating prices. However, global item availability robustly performed in December, reducing the urgent need for firms to stockpile excess inventory. This situation provided businesses some relief from price pressures, allowing them to optimize their stock levels effectively.

On the front of material shortages, businesses have been experiencing fewer shortages than normal, with the global indicator resting below its long-term average. This trend suggests that while supply issues have been significant in the past, the situation is currently more manageable.

Labor Needs and Transportation Costs

A notable rise in labor shortages was recorded, reaching a 14-month high in December. This trend is primarily localized in Europe, indicating growing capacity pressures as businesses struggle to find enough skilled workers to meet their operational demands. Interestingly, transportation costs remained stable, aligning closely with long-term averages. This aspect suggests that while other areas of the supply chain face challenges, transportation logistics are not currently adding to the complications, which may help ease some of the burdens on manufacturers.

Conclusion and Future Outlook

The GEP Global Supply Chain Volatility Index’s findings suggest an unsettling reality for manufacturing sectors in North America and Europe. As they deal with declining purchasing activities and softening demand, the outlook heading into 2026 remains steeped in uncertainty. The apparent resilience of the Asian markets provides a stark contrast, raising questions about future strategies for manufacturers in the West. Stakeholders are left to ponder whether they can adapt and pivot swiftly to avoid further declines and capitalise on existing global opportunities. The next release of this vital index is scheduled for February 11, 2026, allowing for continued tracking of these critical trends in the global supply chain landscape.

For further inquiries, please visit GEP's website to access comprehensive data and historical insights dating back to January 2005.