Five key findings GEP Volatility Index
The index is a leading indicator of procurement and supply chain conditions and is based on a monthly survey of 27,000 businesses.
Five key findings
Demand
The global demand for components, raw materials and commodities has weakened to the greatest amount since January 2023. This is driven by sharper falls in the North American and European markets.
Inventories
The survey indicates there is little desire to hold excess inventory, as reports from businesses safety stockpiling were only slightly higher than the long run average in June.
Material shortages
Businesses reporting a shortage of items fell again in June. They are now at the lowest level since before the pandemic in January 2020.
Labour shortages
The survey reports that trade backlogs directly linked to a shortage of employees or resources are at an all time low.
Transportation
The cost of global transportation fell still further below the historical average, helping to ease the pressure on inflation on companies.
The index marks a third successive month of excessive capacity, as the demand for material weakens in Europe and North America.
Demand in Asia, especially in India, is holding up better which suggests differences in growth between the economies of the east and west.
Input demand in Asia is showing purchasing activity across the region is broadly operating in line with its historical tracking average, with pockets of strength in some Eastern markets led by India, one of the fastest-growing major economies so far in 2023.
Commenting on the data, Joel Johnson, vice president, supply chain consulting, GEP, said: “Weakening demand for components and raw materials in the Western economies, low levels of inventory and excess global supplier capacity suggests that storm clouds are gathering. The softening of demand in the manufacturing sector in the last few months is a leading indicator that the broader economy in the Western hemisphere will slow in the second half of 2023. It’s a perfect time for companies’ procurement to re-negotiate terms for 2024 and 2025 from suppliers.”
How does the GEP Global Supply Chain Volatility Index work?
The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global’s PMI surveys and sent to 27,000 global companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.
What do the values in the GEP Global Supply Chain Volatility Index mean?
A value above 0 indicates that supply chain capacity is being stretched and supply chain volatility is increasing. The further above 0, the greater the extent to which capacity is being stretched.
A value below 0 indicates that supply chain capacity is being underutilised, reducing supply chain volatility. The further below 0, the greater the extent to which capacity is being underutilised.
The index is published once a month and you can review the previous results here.
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