What's Happening?
North American manufacturers have significantly reduced their purchases of raw materials and intermediate goods in October, as reported by the GEP Global Supply Chain Volatility Index. This reduction marks the steepest drop since May and suggests a potential
cooling of production in the coming months. The index, which tracks demand conditions, shortages, transportation costs, inventories, and backlogs, registered -0.33 in October, indicating that global supply chain capacity remains underused. Manufacturers across major economies are keeping inventories lean and curbing new purchases of inputs, following several months of tariff-driven stockpiling earlier in the year.
Why It's Important?
The reduction in material purchases by North American manufacturers could have significant implications for the region's industrial output and economic health. With supply chains running below full capacity, there is less risk of price inflation beyond tariffs, which could benefit consumers but challenge manufacturers aiming to ramp up production. The slowdown in purchasing reflects broader global trends, including a pullback in factory buying across China, which may affect international trade dynamics and economic recovery efforts. Stakeholders in the manufacturing sector may need to adjust strategies to navigate these changes.
What's Next?
Manufacturers are expected to continue working down inventories, which points to weaker production through the winter months. The next release of the GEP Global Supply Chain Volatility Index is scheduled for December 10, 2025, which will provide further insights into supply chain conditions and potential adjustments needed by businesses. Companies may need to reassess their procurement strategies and inventory management to align with the evolving supply chain landscape.
