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Global supply chain index falls to -0.50 in July 2023

17 Aug '23
2 min read
Pic: Shutterstock/Marcin Balcerzak
Pic: Shutterstock/Marcin Balcerzak

Insights

  • The GEP Global Supply Chain Volatility Index fell to -0.50 in July 2023, signifying a rise in excess capacity.
  • The July data shows a grim outlook for 2022, with demand for essential goods at a low and global supplier spare capacity nearing May 2020 levels.
  • Key findings highlight weakening demand, low labour shortages, and reduced transportation costs.
The global supply chain volatility index fell to -0.50 in July 2023, from -0.26 in June. This significant drop indicates a marked rise in excess capacity across global supply chains, aligning with weak global demand and sustained destocking of warehouses.

The July data paints a grim picture for the second half of 2022, with demand for essential goods like commodities, components, and raw materials remaining at a low ebb. The global supplier spare capacity is now almost on par with the peak levels seen during May 2020, showing a weakening of global economic conditions, according to the GEP Global Supply Chain Volatility Index report by S&P Global.

Europe has been hit hardest, where a downturn in demand has reached levels not seen since the 2008-2009 financial crisis. Major European economies, including the UK, Germany, and France, are facing significant challenges. Conversely, North America appears to be taking a slightly different path, with demand dropping to a lesser extent in June, hinting at potential divergences in the economies’ trajectories.

Key findings from July 2023 report the continued weakening of global demand, ending of material shortages, a reduction in safety stockpiling by businesses, historically low labour shortages, and a further drop in global transportation costs. The index readings for Europe, North America, UK, and Asia all demonstrate marked changes, reflecting an uncertain and challenging global economic landscape.

Commenting on the July data, Jonathan Kinghan, vice president, supply chain consulting, GEP, said: “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 familiar terms from suppliers for 2024 and 2025.”

Fibre2Fashion News Desk (NB)

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