Global supply chains now in Goldilocks Zone: GEP Consulting tracker

GEP Consulting is a procurement and supply chain transformation company headquartered in Clark, New Jersey, US.

Improving activity across global supply chains are a direct result of healthier demand, which has picked up consistently in the year-to-date after considerable weakness last year, S&P Global, which compiled the index, said in a release.

The Asian market is at the forefront of this trend, with input demand at the region’s factories remaining strong. Major goods-producing nations like China, India and South Korea recorded growth.

Procurement managers in South Korea, Vietnam, India and China reported greater purchasing activity during April.

The North American market is showing more evidence of tightening capacity, with backlogged work reported by manufacturers, particularly in Mexico. Demand for raw materials, commodities and components, while still subdued, also improved slightly.

Demand conditions were less robust in Europe, with the region’s manufacturing sector continuing to underperform and lag other parts of the globe. Positively, however, the industrial recession across the continent has eased considerably since late last year.

Inventory drawdowns persisted into April, albeit cooling in strength compared to March. Reports from global businesses of stockpiles rising because of price or supply concerns were among the lowest seen in over four years.

After rising for the past three months, global reports of backlogged orders rising because of staff shortages fell in April this year and were broadly aligned with historically typical levels. Regional differences persisted, however, with North America seeing greater labour shortages than elsewhere.

Following recent increases in oil prices, global transportation costs rose for the first time this year in April.

The index remained broadly unchanged for North America at minus 0.30, versus minus 0.31 previously. Although indicative of spare capacity, the input demand trend ticked higher in April, while increased backlogs of work were also reported.

In Europe, the index fell to minus 0.55 from minus 0.62. April’s increase suggests the continent’s industrial downturn continued to ease.

The index decreased to minus 0.47 in the United Kingdom from minus 0.17 as UK manufacturers destock sharply instead of ordering from suppliers.

In Asia, the index rose to 0.07 from minus 0.07, signaling the first month of stretched supplier capacity since January.

“After four years of supply shocks, inflation, stockpiling, and uncertainty, global supply chains are now operating in a Goldilocks zone, a steady state of full capacity, not expanding or contracting too quickly, which is excellent news for global suppliers and business,” explained Mike Seitz, vice president, GEP Consulting.

“In China, we’re seeing a steady pick-up in manufacturing activity, which will encourage Chinese Premier Li Qiang to accelerate efforts to remove barriers imposed by European markets and foster more FDI, especially as the potential for tougher US tariffs and trade policies loom,” he noted.

Fibre2Fashion News Desk (DS)