GEP Volatility Index: Global Underutilisation Persists

GEP has released its latest Global Supply Chain Volatility Index, revealing that capacity continues to be underutilised across global supply chains in December 2025.

The index, a leading economic indicator drawn from monthly surveys of 27,000 businesses, moved up to -0.17 in December, marking its highest level since June 2025.

Despite this slight upward movement, the underlying data continue to highlight softening global manufacturing demand, particularly in North America and Europe, where manufacturers reported sharper pullbacks in purchasing activity. With buffer inventories remaining historically low, the data points to a deteriorating outlook for goods producers across the western world for 2026.

In December 2025, North American manufacturers reduced their procurement activity at the fastest rate since May 2025, continuing a trend that now marks six consecutive months of input demand decline. Weakness was broad-based across the region, with Mexico posting the steepest contraction, underscoring a region-wide pullback in manufacturing activity.

Europe experienced a similar pattern, as factory purchasing fell further, marking the sharpest decline in nine months. This was driven primarily by pronounced cutbacks in Germany, where manufacturers continued to scale back orders amid weak demand pipelines.

Asian markets show strength

In contrast, Asian supply chains are demonstrating greater resilience. Demand for production inputs improved in South Korea, Vietnam and Taiwan, while buying activity at Chinese factories stabilised, helping to support manufacturing demand across the region.

"Strong headline GDP growth in the US is masking a more cautious reality for manufacturers," says John Piatek, Vice President, Consulting at GEP.

"North American and European firms are cutting purchases and inventories, anticipating softening demand in 2026. Excess capacity across global supply chains is giving buyers leverage to secure better pricing and terms."

Regional performance across December

According to GEP's regional analysis, Asia's index dipped slightly to -0.20 from -0.16, but factories' purchases of inputs showed greater resilience than elsewhere, owing to growth in South Korea, Vietnam and Taiwan, and steady buying volumes in China.

North America's index stood at -0.37, indicating underused capacity at the region's suppliers. Purchasing activity weakened further and was the most subdued by region in December.

Europe's index rose to -0.17, its highest since June 2025, due to labour-related constraints impeding order completion in December. Factory purchasing volumes deteriorated, however, particularly in Germany.

The UK's index increased to 0.12, signalling stretched capacity at the country's suppliers for the first time in almost a year and a half.

Demand and inventory trends

Global demand for factory inputs such as commodities, intermediate products and raw materials remained weak at the end of 2025.

Purchasing activity was at its most depressed in western economies, particularly Germany. North America also saw constrained buying volumes at its manufacturers, with Mexico dragging harshly on the region. By contrast, Asia showed greater resilience in factory purchasing activity.

Reports of stockpiling due to supply or price concerns remain below average. Global item availability was strong in December, helping to keep price pressures at bay and reducing firms' needs to hold excess stock in warehouses or build up safety buffers.

The global items in short supply indicator was below its long-run average in December, as has been the case for over two years. This could mean that global businesses are experiencing shortages less frequently than normal.

The labour shortages tracker ticked up to a 14-month high in December and was above its long-run average, indicating a potential rise in capacity pressures due to a lack of staff. Regional data showed that this was centred on Europe. Global transportation costs were in line with their long-term average in December.

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 indicates strained supply chain capacity, leading to increased volatility, while a negative value suggests underutilised supply chain capacity, resulting in reduced volatility.