The GEP Global Supply Chain Volatility Index, a key indicator monitoring demand, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses, remained in negative territory at -0.34 in November. This indicates an eighth consecutive month of spare capacity in global supply chains, suggesting a persistent manufacturing slump into 2024.

Todd Bremer, Vice President of Consulting at GEP, highlighted the ongoing excess vendor capacity, signaling that the end to the global manufacturing recession is still distant. North America stands out in resisting global economic headwinds, while Asia’s sustained excess supplier capacity gives manufacturers leverage to drive down prices in 2024.

November saw a continued weakness in demand for raw materials, components, and commodities, with North America showing signs of recovery. Output and new orders at intermediate goods makers in the U.S. improved. Conversely, Europe faced a severe demand slump, and Asia experienced one of the greatest degrees of underutilized supplier capacity since the post-pandemic era began, posing challenges for the global manufacturing outlook.

Key Findings for November 2023:

– DEMAND: Despite a softer downturn, weakness in demand persisted globally, with North America and Asia showing less aggressive cuts to purchasing compared to considerable declines in Europe.
– INVENTORIES: Global businesses remain cautious about building up stocks, with inventory managers reluctant to hold surplus stock in warehouses.
– MATERIAL SHORTAGES: Reports of item shortages fell in November and remained at their lowest since January 2020.
– LABOR SHORTAGES: Reports of backlogs due to labor unavailability remained historically subdued, indicating unconstrained production capacities.
– TRANSPORTATION: Global transportation costs stabilized, holding close to the long-term average in November.

Regional Supply Chain Volatility:

– NORTH AMERICA: The index rose to -0.21, its highest level since April, suggesting that the manufacturing downturn has passed its peak in the U.S.
– EUROPE: The index rose to -0.85, indicating significant economic weakness and a looming recession for the continent.
– U.K: An increase in the index to -0.58 tentatively suggests that the U.K.’s economy may fare better than some of its European peers, but suppliers still experience considerable spare capacity.
– ASIA: The index rose to -0.24, still indicating one of the greatest degrees of vendor spare capacity in the post-pandemic era.

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