Factory Purchases Slowed Sharply in July, Driving Global Supply Chain Slowdown: GEP Global Supply Chain Volatility Index

• U.S. manufacturers slash purchases after front-loading inventories during the ‘tariff pause’
• Asia factories slow, driven by Japan, South Korea and Taiwan manufacturers
• Europe’s fragile recovery stalled in July as German growth weakened ahead of tariff agreements  

Clark, N.J., Aug. 13, 2025 – Global supply chain activity fell in July as U.S. manufacturers sharply tapered purchases of materials and components after building inventories in June ahead of the end of the ‘tariff pause,’ 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 increased spare capacity worldwide. The U.S. was the main driver, with North America’s index falling to -0.33 from -0.06. The reversal follows a surge in June when U.S. factories front-loaded orders to beat anticipated tariff changes. In July, U.S. 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.”

REGIONAL KEY FINDINGS

Asian factory purchasing activity remains slightly below trend due to growing weakness in Japan and South Korea. Data was mostly collected prior to these two countries striking double-digit tariff agreements with the U.S. Taiwanese factories also saw an accelerated downturn, weighing on the broader region. Notably, after declining in the two previous months, China’s factory buying volumes rose in July. 

Europe industrial recovery slipped: Its index dropped to -0.30 from 0.01. Germany’s rebound slowed, highlighting the fragile nature of the continent’s industrial recovery. 

U.K.: Index declined to -0.58, from -0.41, signaling that the U.K.’s supply chains continue to experience an elevated level of spare capacity.  

Interpreting the data:

• Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
• Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

CATEGORY KEY FINDINGS 

INVENTORIES: Safety stockpiling eased, indicating limited concern over supply bottlenecks or price surges. 

LABOR & TRANSPORTATION: Staffing capacity and transportation costs were stable, with no signs of inflationary pressure from these sources.  

For more information, visit www.gep.com/volatility

Note: Full historical data dating back to January 2005 is available for subscription. Please contact economics@spglobal.com.

The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, Sep. 11, 2025.

About the GEP Global Supply Chain Volatility Index

The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global’s PMI® surveys, sent to companies in over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.

• A value above 0 indicates that supply chain capacity is being stretched and supply chain volatility is increasing. The further above 0, the greater the extent to which capacity is being stretched.
• A value below 0 indicates that supply chain capacity is being underutilized, reducing supply chain volatility. The further below 0, the greater the extent to which capacity is being underutilized.

A Supply Chain Volatility Index is also published at a regional level for Europe, Asia, North America and the U.K. For more information about the methodology, click here.

About GEP

GEP^® delivers AI-powered procurement and supply chain solutions that help global enterprises become more agile and resilient, operate more efficiently and effectively, gain competitive advantage, boost profitability and increase shareholder value. Fresh thinking, innovative products, unrivaled domain expertise, smart, passionate people — this is how GEP SOFTWARE™, GEP STRATEGY™ and GEP MANAGED SERVICES™ together deliver procurement and supply chain solutions of unprecedented scale, power and effectiveness. Our customers are the world’s best companies, including more than 1,000 Fortune 500 and Global 2000 industry leaders who rely on GEP to meet ambitious strategic, financial and operational goals. A leader in multiple Gartner Magic Quadrants, GEP’s cloud-native software and digital business platforms consistently win awards and recognition from industry analysts, research firms and media outlets, including Gartner, Forrester, IDC, ISG, and Spend Matters. GEP is also regularly ranked a top procurement and supply chain consulting and strategy firm, and a leading managed services provider by ALM, Everest Group, NelsonHall, IDC, ISG and HFS, among others. Headquartered in Clark, New Jersey, GEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.

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