Global supply chains ran at their highest capacity of the year in June, driven by U.S. manufacturers rushing to buy materials ahead of a potential end to a pause on tariffs, according to the latest Global Supply Chain Volatility Index from consulting and technology firm GEP.
Why it matters: The spike in activity suggests companies are not waiting for policy certainty, but are instead actively stockpiling inputs to mitigate the risk of future cost increases. This front-loading of orders creates a temporary boom that may mask underlying weaknesses or lead to a subsequent slowdown.
The big picture: The recovery is uneven across the globe, with Europe showing significant strength while parts of Asia continue to lag.
- For the first time in over two years, European manufacturers operated at full capacity, emerging from a prolonged slump thanks to demand from U.S. customers and a rebound in German exports.
- North American supply chains were also effectively at full capacity as companies ramped up purchasing of commodities, parts and raw materials.
- Asia’s supply chains showed signs of recovery, but spare capacity remains, particularly in Southeast Asia and China where factory purchasing has been more subdued.
- The global index rose to -0.17 in June from -0.46 in May. A reading of 0 indicates supply chains are at full capacity.
- Europe’s regional index hit 0.01, up from -0.30, signaling its industrial sector is no longer in a downturn.
- North America’s index rose to -0.06 from -0.24.
- Despite the tariff situation, the report found no evidence of a dramatic escalation in cost inflation, and material and labor shortages remain low.
"But under the surface, companies are putting in place contingencies: stockpiling inputs, reshaping supplier networks, near-shoring operations and securing supply chain financing," he noted.
What to watch: The focus now shifts to whether this activity represents sustainable growth or a temporary bubble. Once companies have built up their inventories, manufacturing orders could see a sharp decline, especially if new tariffs are imposed and consumer demand softens. The next GEP index release August 12 will offer the first glimpse of market activity following June's surge.
The GEP Global Supply Chain Volatility Index can be downloaded here.
SOURCE: GEP
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