Key Insights: GEP Global Volatility Index February 2025

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 — fell to -0.45 in February, from -0.21 in January, its lowest level since July 2023.

Index > 50 means growth. The further above 50, the faster the growth. Index < 50 means decline. The further below 50, the larger the contraction.

The index is showing that overall supply chain capacity became more underutilised across the globe, region reporting shows greater differences between the geography.

US 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. While the country's factories have reported accelerating sales growth as their customers acted to front-run price and supply challenges arising from tariffs, driving up procurement. With efforts to mitigate tariffs also propelled stockpiling by US manufacturers in February.

On the other side of the coin, Mexican and Canadian manufacturers harshly reduced their purchases in response to a rapid reduction in exports as US companies refrained from placing orders due to the threat of tariffs and trade policy uncertainty.

While across the Atlantic, Europe manufacturers are making inventories cutbacks. The continent's supply chains continue to be underutilised as the industrial sector remains sluggish. However, 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.

In 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.

Krish Vengat N., GEP's Vice President of Consulting, says: "With tariffs driving uncertainty, US manufacturers are racing to secure materials, while Canadian and Mexican suppliers are feeling the squeeze from weaker export demand. In contrast, Asia's supply chains are operating at full capacity, fuelled by strong export growth.

"Companies must remain agile—diversifying supply sources and optimising inventory strategies to navigate this ongoing volatility."

What supply chains looked like in February 2025

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 US 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, our 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: Our global item shortages indicator, which tracks the availability of critical commodities, common inputs and components, remains below its long-term average, signalling robust global material supply levels. This metric implies that vendors have stock to meet orders from their customers.

LABOUR SHORTAGES: In February, we received 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.

Regional variations in the GEP Global Supply Chain Volatility Index

North America: Index rises to -0.18, from -0.22, a seven-month high and signalling that North American supply chains are their busiest since July 2024. This was exclusively a reflection of conditions in the US, however, as Mexican and Canadian manufacturing industries slowed in February.

Europe: Index falls to -0.72, from -0.61, signalling slightly greater slack in Europe's supply chains compared with the beginning of the year.

UK: Index down to -0.85, from -0.63, its lowest level since December 2023, a signal that the UK economy is slowing in the first quarter.

Asia: Index at 0.00, versus 0.03 in January. Overall, the data shows that Asian supply chains are at full capacity. Asian factories are benefitting from stronger export growth, underlying data revealed.

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.

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