GEP’s Global Supply Chain Volatility Index, which tracks demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses, fell to -0.45 in February, from -0.21 in January, its lowest level since July 2023.
While the index shows that overall supply chain capacity became more underutilized globally, regional data reveals significant geographical differences.
In the U.S., manufacturers’ demand for raw materials and components saw a notable uptick in February, reflecting a mix of preparations for orders and efforts to avoid higher costs from additional tariffs. U.S. factories also reported accelerating sales growth as their customers acted to front-run price and supply challenges arising from tariffs, driving up procurement. Efforts to mitigate tariffs also propelled stockpiling by U.S. manufacturers in February.
In stark contrast, Mexican and Canadian manufacturers harshly reduced their purchases in response to a rapid reduction in exports as U.S. companies refrained from placing orders due to the threat of tariffs and trade policy uncertainty.
In Europe, manufacturers are making inventories cutbacks. The continent’s supply chains continue to be underutilized as the industrial sector remains sluggish. That said, there does appear to be some early indication of recovery as the downturn in factory demand for inputs cooled to its weakest in two-and-a-half years.
Asia supply chains continue to be at full capacity in February, as was the case at the start of the year, making them the most active globally. Factories in parts of the region such as China, Taiwan and India reported strong export growth.
“With tariffs driving uncertainty, U.S. manufacturers are racing to secure materials, while Canadian and Mexican suppliers are feeling the squeeze from weaker export demand,” GEP Vice President of Consulting Krish Vengat N. said. “In contrast, Asia’s supply chains are operating at full capacity, fueled by strong export growth.”
February 2025 Key Findings
- Demand: Globally, demand for raw materials, components and commodities is trending broadly level with its long-term average, following over two-and-a-half years of subdued purchasing by factory procurement managers. Buying activity is the strongest in Asia, although a pick-up in the U.S. was recorded in February as manufacturers restocked and ordered ahead of higher tariffs.
- Inventories: Global stockpiling activity decreased in February, suggesting that global manufacturers’ appetite to hold excess stock in their warehouses remains low. Although demand is trending upwards, the data suggests that procurement managers are still carefully managing cashflow in an environment of rising production costs. The data also implies a “wait-and-see” mentality to increased global trade policy uncertainty.
- Material Shortages: The global item shortages indicator, which tracks the availability of critical commodities, common inputs and components, remains below its long-term average, signaling robust global material supply levels. This metric implies that vendors have stock to meet orders from their customers.
- Labor Shortages: In February, there were fewer reports from global manufacturers of backlogs rising due to inadequate staff capacity.
- Transportation: Global transportation costs were unchanged from January, when they hit the highest in six months. Still, they remain close to levels which can be considered normal, by historical standards.