Key Insights: GEP Global Volatility Index March 2025

As the GEP Global Supply Chain Volatility Index decreased for a third time, it shows the reality of spare capacity across the global supply chain. For a third successive month, it fell again in March to -0.51 and posted its lowest value in almost five years, indicating the highest degree of spare capacity across global supply chains since the height of the COVID-19 pandemic in 2020.

The index is a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses.

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 latest data from GEP shows a sharp decline in the number of companies building buffers into their stocks. Overall, manufacturers' stockpiling was the lowest in nine years, highlighting caution among procurement leaders worldwide about future demand.

John Piatek, Vice President, Consulting GEP, says: "March's sharp decline in supplier activity was due to the stifling effect of tariffs and tariff-related uncertainty, which had its strongest impact in North America, where manufacturers reported cutbacks to purchasing activity and inventories.

"Until just last week, most companies had taken a wait-and-see approach. Now, organisations are aggressively exploring every possible way to eliminate costs, push suppliers to absorb tariffs, and de-risk their global supply chains."

Across in the UK, supplier spare capacity rose for the fourth month in succession to a level that has only been surpassed during either the COVID-19 pandemic or global financial crisis period. As factories across the country aggressively destocked and reduced spending during March, suggesting the country's industrial sector is bracing for a downturn.

GEP's data showed significant slack across European supply chains in March, although in contrast to the UK, there were budding signs of recovery for the continent's industrial sector as demand for raw materials, commodities and components were down by the softest margin in almost three years.

Meanwhile in Asia, supply chains are broadly running at full capacity. In March, there was even a slight uptick in regional procurement activity, driven by China and India.

What supply chains looked like in March 2025

Demand: GEP's indicator, which tracks global demand for raw materials, components and commodities, was broadly unchanged during the month and therefore remained close to its long-term average, signalling global purchasing activity was near its historical trend. There remains considerable geographical differences, however, with a worsening of factory input demand in North America contrasting with some pick-up in Europe and Asia.

Inventories: Reports of safety stockpiling from manufacturers across the globe decreased in March to their lowest since July 2016 as procurement managers show a strong reluctance to add to their inventories. The data continues to point to the adoption of a "wait-and-see" mentality among buyers as uncertainty regarding worldwide trade conditions remains rife.

Material shortages: GEP's 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: Reports of labour shortages remained contained. Companies are not struggling to process workloads due to staff capacity constraints, according to GEP's backlogs tracker.

Transportation: Global transportation costs fell to their lowest in the year-to-date. Overall, they were close to their long-term average level in March.

Regional variations in the GEP Global Supply Chain Volatility Index

North America: Index at -0.63, down severely from -0.18, signalling a sharp rise in spare capacity across North American supply chains. US, Canadian and Mexican manufacturers retrenched in March.

Europe: Index ticks up to -0.63, from -0.72, pointing to a still-high level of underutilisation across European supply chains. Tentative signs of recovery emerge, however, as weakness in input demand recedes.

UK: Index slumps to -1.23, a near five-year low, from -0.85, with UK procurement managers significantly reducing buying and inventories as the country's economy shows signs of slowing.

Asia: Index at -0.12, down from 0.00 in February. Overall, Asian supply chains are broadly operating at full capacity.

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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