Key Learnings from GEP Global Volatility Index January 2025
The GEP Global Supply Chain Volatility Index, a pivotal gauge derived from a monthly survey of 27,000 businesses, monitors various aspects including demand, shortages and transportation costs.
At the onset of 2025, it registers at -0.21, indicating that global supply chains are operating at or near full capacity â a condition that is confirmed when the index levels out at zero.
The latest readings were collected just before the US government announced planned tariffs on China, alongside initial tariff discussions regarding Mexico and Canada. This timing is crucial as it pre-dates significant policy shifts that could impact global supply chain dynamics.
Notably, January 2025 witnessed a significant uptick in North American procurement activities, propelled by US manufacturers. In stark contrast, procurement actions within Mexican and Canadian manufacturers declined, painting a gloomy picture for the near future of these regions.
Meanwhile, key Asian economies like China and India ramped up their input demands to cater to increasing production needs. South Korea also noted a distinct surge in procurement activities.
On the other hand, the industrial landscape in Europe paints a different picture. Suffering from substantial levels of underused capacity, countries such as Germany, France, Italy and the UK saw a recessionary trend in manufacturing, with minimal material procurement activities as of January 2025.
"Januaryâs rise in manufacturersâ procurement across APAC and the US signals steady growth ahead in Q1," remarks John Piatek, Vice President of Consulting at GEP.
“Globally, companies are largely taking a wait-and-see approach to tariffs rather than absorbing the immediate cost of increasing buffer inventories. However, many Western firms are accelerating China-plus-one investments to diversify and near-shore manufacturing, assembly and distribution. European manufacturers are especially vulnerable, as the sector has been contracting for nearly two years with no turnaround in sight.
“In the US, where manufacturing represents just 12% of GDP, the bigger concern for business is the potential revenue losses in China because of trade tensions.”
- Supply chains across the globe are operating at full capacity, with the notable exception of Europe, which remains in a protracted industrial recession.
- Asiaâs manufacturing growth was reported by major exporters, led by South Korea, China and India.
- Despite the possibility of tariffs and significant uncertainty surrounding their implementation, global manufacturers are not stockpiling inventories.
Global trends and index implications
DEMAND: After a previous decline, global manufacturersâ procurement of raw materials is on the rebound â particularly in Asia, where demand aligns with historical averages, and in North America, which is experiencing an identifiable rise in input purchasing. The European situation remains bleak as the region continues to battle a prolonged downturn.
INVENTORIES: The inclination to stockpile safety inventories remains moderate globally, with only a minor uptick in inventories reported, primarily due to concerns over pricing or availability.
MATERIAL AND LABOUR SHORTAGES: January saw the lowest shortage reports in five years for key commodities, suggesting effective stock management. However, the workforce shortage is becoming a major hurdle, directly contributing to increasing factory backlogs.
TRANSPORTATION: Reflecting an upward trend, global transportation costs peaked in January, marking the highest rise over the past six months.
Regional Trends in the GEP Global Supply Chain Volatility Index
- North America: The index increased to -0.22 from -0.53, reaching a six-month high, indicating a rebound in procurement activity at the start of the year.
- Europe: The index declined to -0.61 from -0.49, reflecting continued weakness in supply chain activity across the region.
- UK: The index dropped to -0.63 from -0.41 in December, marking a 13-month low and suggesting a weaker outlook for UK manufacturing in 2025.
- Asia: The index rose to 0.03 from -0.09, signalling that suppliers in the region are largely operating at full capacity.
Understanding the GEP Global Supply Chain Volatility Index
A collaborative effort between GEP and S&P Global, the GEP Global Supply Chain Volatility Index utilises comprehensive PMI survey data collected from tens of thousands of companies worldwide. It integrates data from several sub-indices which include PMI Comments Trackers and Commodity Price & Supply Indicators from S&P Global.
A negative index value typically suggests underutilisation of supply chain capacities, which equates to decreased volatility. In contrast, a positive index value denotes overstretched resources, signalling increased supply chain volatility and potential challenges in meeting demand.
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