Key Insights: GEP Global Volatility Index July 2025
Global supply chain activity fell in July as manufacturers in the US sharply tapered purchased materials and components after building inventories in June ahead of the end of tariff pause between the US and China - President Trump extended the 90-day tariff pause on 12 August.
This latest data is according to the GEP Global Supply Chain Volatility Index, a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses.
- US manufacturers slash purchases after front-loading inventories during the 'tariff pause'
- Asia factories slow, driven by Japan, South Korea and Taiwan manufacturers
- Europe's fragile recovery stalled in July as German growth weakened ahead of tariff agreements
Spare capacity increases as index falls
The latest report shows how the index has fallen to -0.35 from -0.17 in June, which highlights an increase in spare capacity across the globe.
The US was the main driver, as the index in North America fell to -0.33 from -0.06. The reversal follows a surge in June – in which US factories front-loaded orders as a way to beat the anticipated tariff changes.
In July, manufacturers in the US sharply tapered purchases of inputs - materials, components and commodities - signalling expectations of slowing demand going forward.
John Piatek, Vice President, Consulting, GEP, says: "When we remove companies' front-loading inventories and rerouting goods to avoid tariffs, the underlying picture points to slowing manufacturing demand worldwide.
"The July data shows a clear pullback in orders, with U.S. manufacturers preparing for lower demand going forward."
Widespread weakness
Asian factory purchasing activity remains slightly below trend due to growing weakness in Japan and South Korea. Data was mostly collected prior to these two countries striking double-digit tariff agreements with US Taiwanese factories also seeing an accelerated downturn, weighing on the broader region.
Notably, after declining in the two previous months, China's factory buying volumes rose in July.
Europe's industrial recovery slipped: its index dropped to -0.30 from 0.01. Germany's rebound slowed, highlighting the fragile nature of the continent's industrial recovery.
The UK's index declined to -0.58, from -0.41, signalling that the UK's supply chains continue to experience an elevated level of spare capacity.
CATEGORY KEY FINDINGS
INVENTORIES: Safety stockpiling eased, indicating limited concern over supply bottlenecks or price surges.
LABOUR & TRANSPORTATION: Staffing capacity and transportation costs were stable, with no signs of inflationary pressure from these sources.
How does the GEP Global Supply Chain Volatility Index work?
The GEP Global Supply Chain Volatility Index is a collaborative effort between S&P Global and GEP.
It draws from S&P Global's PMI surveys, which are distributed to 27,000 companies worldwide, a weighted aggregation of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators provided by S&P Global.
A positive value in the GEP Global Supply Chain Volatility Index indicates strained supply chain capacity, leading to increased volatility. The higher the value, the greater the strain on capacity.
Conversely, a negative value suggests underutilised supply chain capacity, resulting in reduced volatility. The lower the value, the greater the degree of capacity underutilisation.
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.
