GEP Global Supply Chain Index July 2023
The GEP Supply Chain Volatility is a leading indicator for procurement and supply chain professionals regarding conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses. We have previously written about it here.
The index fell to -0.50 in July, from -0.26 in June, which indicates an increased rise in excess capacity across global supply chains in an atmosphere of weak global demand conditions and continued destocking of warehouses.
These are the three key findings of the latest report.
1) Excess capacity in the world's supply chains rose sharply in July and at the fastest pace since May 2020, pointing to deteriorating economic conditions.
2) Demand conditions, which remain depressed globally, declined at even sharper rates in Europe and the UK in July; contrasting with a shallower demand downturn in North America, highlighting some divergence in global economies.
3) European supply chain spare capacity was at its greatest level since the global financial crisis of 2008-2009.
“We’re now in the 14th consecutive month of subdued demand across Europe, and our July data shows it’s getting significantly worse across the continent, in contrast to North America. Our data does not indicate a ‘soft landing’ in Europe. As a result, companies have greater leverage to negotiate favourable terms from suppliers for 2024 and 2025.” - Jonathan Kinghan, vice president, supply chain consulting, GEP
Regional index breakdown
The index rose to -0.37 from -0.85, indicating a slower rise in excess capacity.
The index fell to its lowest level since the 2008-2009 global financial crisis at -1.07, from -0.67 in June, indicating a marked worsening of economic conditions in Europe.
The index fell to -1.01, from -0.66 as weakness in major trading partners in Europe continues, driving a sharper rise in supplier spare capacity.
While the index fell to a three-year low of -0.31, from -0.17 in July, the region still shows more resilience than the rest of the world.
Nucleus would note that 14 months of consecutive decreases in demand in European and UK markets correlate to the timing of Russia invading Ukraine. And probably resulting from the subsequent increases in energy costs across Europe. We are encouraged that in North America and parts of Asia demand seems resilient.