GEP Volatility Index: Supply Chains Remain Underutilised

Global supply chains are experiencing a period of reduced pressure with notable underutilisation of capacity, according to the latest GEP Global Supply Chain Volatility Index.

The report, a leading economic indicator based on a monthly survey of 27,000 businesses registered a value of –0.33 in October. This figure indicates that spare capacity exists across global supply networks. The fall in input demand was the most notable since May 2025, suggesting a cooling of production is likely in the coming months.

A collaborative effort between S&P Global and GEP, the index tracks key metrics including demand conditions, shortages, transportation costs, inventories and backlogs. A negative value suggests supply chain capacity is being underutilised, which reduces volatility. 

North American inventories

A notable pullback is being observed in North America, where the index fell to -0.45 - its lowest point since March. This slowdown follows several months of strategic stockpiling, prompted by tariffs earlier in 2025.

Now, firms are reporting both lower material purchasing and a conscious reduction in inventory building. This strategic adjustment is taking pressure off supply chains which are currently operating well below their full capacity.

The trend points towards a deliberate move by businesses to adopt leaner inventory models in the face of decreased demand and sufficient supply availability.

Michael DuVall, Global Head of Supply Chain Strategy at GEP, says: "North America is seeing the clearest sign yet of a manufacturing pullback.

"Manufacturers are buying less and working down inventories which points to weaker production through the winter. With space capacity across global supply, we do not anticipate any price pressure beyond tariffs on buyers."

European and Asian supply chain adjustments

The situation in other major economic regions shows a more varied picture. In Europe, the index rose to a three-month high of -0.25 from -0.53. While this marks a marginal increase in activity, it still indicates that supplier capacity remains underutilised.

Firms in key economies such as Germany, France, Italy and the UK continue to restrict raw material purchasing, which highlights the region's sluggish recovery from a protracted industrial downturn. The UK specifically saw a sharp drop in its index to -0.80 from -0.57, highlighting a substantial reduction in activity at its suppliers.

In Asia, the index dropped to -0.30 from -0.06, indicating greater spare capacity. This was largely prompted by a slowdown in purchasing from Chinese manufacturers which offset the continued strength seen in India.

This dynamic creates a complex environment for supply chain managers in the region, who must navigate the contrasting momentum of Asia’s two largest economies. The pullback in factory buying across China contributes to a broader softening of conditions across the continent.

Key indicators show reduced strain

An analysis of the components that form the index provides deeper insight into the current state of global supply chains. These findings suggest a general easing of the pressures that have caused notable disruption in recent years.

• Demand: A boost in factory purchasing seen in September was reversed in October. Manufacturers in key economies like China and the US reported procurement slowdowns and orders for commodities, components and intermediate goods remained subdued, indicating a soft near-term outlook for producers.
• Inventories: Reports from global procurement managers of stockpiling due to price or supply fears remained at historically low levels. This indicates limited concern about purchasing price inflation or shortages and the data shows a continued preference among manufacturers for lean warehouse operations.

• Material Shortages: The global item shortages tracker remained well below its long-term trend level. This signals healthy supply levels for the world's manufacturers, suggesting factories will have little difficulty in sourcing vendors for necessary commodities, components and other intermediate products.
• Labour Shortages: There was a modest rise in labour-related capacity constraints. Reports of backlogs rising due to inadequate staff supply ticked up to a four-month high but the labour shortages tracker was only marginally above its long-term trend.
• Transportation: Global transportation costs ticked down slightly in October, falling to just below historically average levels – providing some relief on the logistics front.

The GEP index aggregates six sub-indices derived from S&P Global's extensive PMI survey data. A positive value indicates strained supply chain capacity and increased volatility, while a negative value points to underused capacity and a more stable environment for global trade and manufacturing.