U.S. Factory Purchases Decline, Impacting Global Supply Chains and Manufacturing Demand
In July, the activity across global supply chains took a notable dip as U.S. manufacturers significantly reduced their purchasing of materials and components. This decline was reported just after a period when inventories had been strategically built up in June as companies prepared for an imminent end to a temporary tariff pause. The insights come from the GEP Global Supply Chain Volatility Index, a reliable measure that tracks demand conditions, scarcity of resources, transportation expenses, inventory levels, and backlog trends based on feedback from approximately 27,000 businesses. The index saw a sharp decline, dropping to -0.35, down from -0.17 in June, signaling increased available capacity in supply chains worldwide.
The reduction in U.S. purchasing was a direct response to past front-loading of orders during the tariff pause, which encouraged manufacturers to accelerate their purchases to mitigate the potential impact of tariff changes. As John Piatek, vice president of consulting at GEP, pointed out, "Removing the noise created by front-loaded inventory signals a clear trend towards slowing manufacturing demand globally." He further elaborated that July's data reflects a distinct pullback in orders as U.S. manufacturers brace themselves for a likely decrease in demand moving forward.
1. Asia - Purchasing activity in Asian factories remained slightly below normal due to a notable slowdown in Japan and South Korea. The data for this index was primarily gathered before both countries engaged in double-digit tariff agreements with the U.S. In contrast, Taiwan experienced a marked downturn in manufacturing activity. Interestingly, after two previous months of decline, factory purchasing volumes in China rebounded in July, showing signs of recovery.
2. Europe - The European index also faced challenges, slipping to -0.30 from 0.01. Germany's economic framework appeared to slow, highlighting the fragile recovery of the industrial sector across the continent. The U.K. similarly reported a drop in its index, falling to -0.58 from -0.41, further indicating an underutilization of supply chains in that region.
The GEP Global Supply Chain Volatility Index demonstrates clear signs of ongoing challenges—indicating that while certain areas are regaining traction, global manufacturing demand is facing headwinds as businesses adjust their strategies in reaction to market and regulatory conditions. With supply chain capacity being underutilized, the focus will need to shift towards managing inventories effectively while preparing for potential fluctuations in demand in the coming months.
For further details regarding past data and trends, you can subscribe to GEP’s comprehensive reports, which have historical data accessible dating back to January 2005. The next GEP Global Supply Chain Volatility Index will be released at 8 a.m. ET on September 11, 2025. For more insights and analyses on supply chain dynamics, visit GEP's website.
About GEP: GEP offers AI-driven solutions focused on procurement and supply chain management, empowering global enterprises for efficiency and resilience, ultimately elevating competitiveness and profitability.
About SP Global: SP Global is dedicated to delivering critical intelligence that empowers informed decision-making across various sectors, enabling organizations to navigate investment opportunities and energy transitions effectively.
The reduction in U.S. purchasing was a direct response to past front-loading of orders during the tariff pause, which encouraged manufacturers to accelerate their purchases to mitigate the potential impact of tariff changes. As John Piatek, vice president of consulting at GEP, pointed out, "Removing the noise created by front-loaded inventory signals a clear trend towards slowing manufacturing demand globally." He further elaborated that July's data reflects a distinct pullback in orders as U.S. manufacturers brace themselves for a likely decrease in demand moving forward.
Regional Insights
1. Asia - Purchasing activity in Asian factories remained slightly below normal due to a notable slowdown in Japan and South Korea. The data for this index was primarily gathered before both countries engaged in double-digit tariff agreements with the U.S. In contrast, Taiwan experienced a marked downturn in manufacturing activity. Interestingly, after two previous months of decline, factory purchasing volumes in China rebounded in July, showing signs of recovery.
2. Europe - The European index also faced challenges, slipping to -0.30 from 0.01. Germany's economic framework appeared to slow, highlighting the fragile recovery of the industrial sector across the continent. The U.K. similarly reported a drop in its index, falling to -0.58 from -0.41, further indicating an underutilization of supply chains in that region.
Key Findings by Category
- - Inventories: The trend towards safety stockpiling has eased, indicating a lower level of concern regarding supply bottlenecks or price surges.
- - Labor and Transportation: Stability was noted in staffing capacity along with transportation costs, avoiding inflationary pressures associated with these areas.
The GEP Global Supply Chain Volatility Index demonstrates clear signs of ongoing challenges—indicating that while certain areas are regaining traction, global manufacturing demand is facing headwinds as businesses adjust their strategies in reaction to market and regulatory conditions. With supply chain capacity being underutilized, the focus will need to shift towards managing inventories effectively while preparing for potential fluctuations in demand in the coming months.
For further details regarding past data and trends, you can subscribe to GEP’s comprehensive reports, which have historical data accessible dating back to January 2005. The next GEP Global Supply Chain Volatility Index will be released at 8 a.m. ET on September 11, 2025. For more insights and analyses on supply chain dynamics, visit GEP's website.
About GEP: GEP offers AI-driven solutions focused on procurement and supply chain management, empowering global enterprises for efficiency and resilience, ultimately elevating competitiveness and profitability.
About SP Global: SP Global is dedicated to delivering critical intelligence that empowers informed decision-making across various sectors, enabling organizations to navigate investment opportunities and energy transitions effectively.
Topics General Business）
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