A new report indicates that manufacturers in North America and Europe significantly reduced purchasing activity at the end of 2025, signaling a cautious outlook and potential economic slowdown heading into the new year, while their Asian counterparts showed greater stability and even growth.

Why it matters: The divergence points to a deteriorating forecast for goods producers in the West. For consultants, this suggests clients in manufacturing and logistics will likely prioritize cost-optimization, inventory management, and supply chain diversification in 2026.

By the numbers: The GEP Global Supply Chain Volatility Index, a survey of 27,000 businesses, detailed the regional split in its December 2025 findings.

  • North America: Procurement activity fell at the fastest rate since May 2025, marking the sixth consecutive month of decline. Weakness was broad-based, with Mexico posting the steepest contraction.
  • Europe: Factory purchasing saw its sharpest drop in nine months, driven largely by cutbacks in Germany amid weak demand.
  • Asia: Supply chains showed more resilience. Demand for inputs grew in South Korea, Vietnam, and Taiwan, while purchasing activity at Chinese factories stabilized.
What they're saying: "Strong headline GDP growth in the U.S. is masking a more cautious reality for manufacturers,” said John Piatek, Vice President of Consulting at GEP. "North American and European firms are cutting purchases and inventories, anticipating softening demand in 2026."
·       Piatek added that the resulting "excess capacity across global supply chains is giving buyers leverage to secure better pricing and terms.”

Zoom in: Despite the regional weakness, the global index figure edged up to -0.17, its highest since June 2025. However, this still points to underutilized capacity across global supply chains.

  • The report found that material shortages are less frequent than their long-run average.
  • Conversely, labor shortages are at a 14-month high, with the pressure centered on Europe.
  • Global transportation costs remained in line with their long-term average.
The big picture: The trend suggests that while some inflationary pressures like material costs and shipping are easing, weakening demand in the West is becoming the primary concern for the industrial sector. This may accelerate corporate efforts to build more resilient and regionally diversified supply chains to weather potential downturns.

SOURCE: GEP

NOT FOR REPRINT

© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.