Key Insights: GEP Global Volatility Index May 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 -0.46 in May, from -0.39 in April, signalling increasing spare capacity across the world's supply chains as a result of tariffs and ongoing trade war.
The activity for global supply chains lowered, believed to be the result of a deterioration across Asia, which reported its greatest degree of spare capacity in almost 18 months.
Raw materials and components purchased by factories in the region weakened for the second month in a row — highlighting stronger retrenchment. Notably, China was central to this region-wide decline during May.
North America battles underutilisation amid strategic stockpiling
Supply chains across North America continue to be underutilised, with weakness shown in Mexico and Canada.
US manufacturers also continue to be underutilised — however, there was an increase in the purchasing of raw materials and commodities, bolstering inventories to protect against future higher prices or supply disruptions.
Europe shows green shoots while UK manufacturing struggles
The European industrial sector edged closer to recovery, with activity at the region's suppliers broadly level with April, which was the strongest for 10 months. Manufacturers on the continent have been buoyed by recently announced fiscal stimulus measures, particularly in Germany. The UK's supply chains remain severely underutilised, with the country's manufacturers retrenching aggressively again in May.
John Piatek, VP consulting, GEP, says: "US-China trade talks come at a critical moment — Chinese factory demand has dropped sharply, and US manufacturing is weighed down by excess capacity.
"This isn't just macro noise. Tariffs are already reshaping procurement strategies as companies front-load inventories, diversify suppliers and brace for a longer game of economic decoupling."
Regional variations in the GEP Global Supply Chain Volatility Index
Asia: Index fell to -0.40, from -0.32, signalling that the region's supply chains were the most underutilised since December 2023. Chinese factories pulled back their purchasing in May.
North America: Index rose to -0.24, from -0.34, reflecting some pickup in purchasing volumes in the US, driving supply chain activity higher. Weak conditions in Mexico and Canada continue to weigh on manufacturing in the region.
Europe: Index changed little since April (-0.29), down fractionally to -0.30. While still indicating underutilised supplier capacity, the index is much higher than on average over the past two years as Europe's industrial recovery progresses.
UK: Index rose to -0.97, from -1.12, but is still at a level indicative of considerable slack across supply chains, showing marked weakness across the UK manufacturing industry.
What supply chains looked like in May 2025
DEMAND: Global demand for raw materials, commodities and components remained subdued, with no improvement seen since April meaning it remains at its weakest over the year to date. Procurement activity in Asia was down at its sharpest in nearly a year and a half, driven by retrenchment among Chinese factories.
INVENTORIES: Global safety stockpiling reports remain historically low, primarily due to inventory strategies in Europe, with manufacturers across the continent continuing to favour lean warehouses. This contrasts with the trend in North America, with safety stockpiling above its long-term average for a second successive month.
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: Reports of backlogged work rising due to staff shortages ticked up slightly at the global level in May, but overall they remain close to historically typical levels, indicating that suppliers' workforce capacity remains sufficient to cope with current demand.
TRANSPORTATION: Global transportation costs were broadly in line with their long-term average in May.
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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