Global supply chain activity fell in July as US manufacturers sharply tapered purchases of materials and components after building inventories in June ahead of the end of the ‘tariff pause’.
That 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.
The index dropped to -0.35 from -0.17 in June, signaling increasing spare capacity worldwide. The US was the main driver, with North America’s index falling to -0.33 from -0.06.
The reversal follows a surge in June when US factories front-loaded orders to beat anticipated tariff changes. In July, US manufacturers sharply tapered purchases of inputs – materials, components and commodities – signaling expectations of slowing demand going forward.
“When we remove companies’ front-loading inventories and rerouting goods to avoid tariffs, the underlying picture points to slowing manufacturing demand worldwide,” said John Piatek, Vice President, Consulting, GEP. “The July data shows a clear pullback in orders, with U.S. manufacturers preparing for lower demand going forward.”
The UK index declined to -0.58, from -0.41, signaling that the supply chains continue to experience an elevated level of spare capacity.
Europe industrial recovery slipped as its index dropped to -0.30 from 0.01. Germany’s rebound slowed, highlighting the fragile nature of the continent’s industrial recovery.
