TARIFF PAUSE SPURS GLOBAL MANUFACTURING ACTIVITY IN JUNE, WITH GLOBAL SUPPLY CHAINS NOW OPERATING CLOSE TO FULL CAPACITY: GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX

Rhea-AI Summary

The GEP Global Supply Chain Volatility Index showed significant improvement in June 2025, rising to -0.17 from -0.46 in May, marking its highest level this year despite U.S. imposed 10% tariffs.

Key regional developments include: Europe operating at full capacity (index 0.01) for the first time in two years, driven by U.S. orders and German demand; North America approaching full capacity (-0.06) as U.S. manufacturers accelerate purchasing before tariff pause ends; and Asia showing recovery (-0.27) led by India, Japan, and South Korea, though Southeast Asian capacity remains underutilized.

Notable findings include increased global stockpiling activity, stable material availability, sufficient workforce capacity, and normal transportation costs, with no significant cost inflation despite tariffs.

Positive

• Global factory purchasing activity reached its highest level in over a year
• European manufacturing reached full capacity utilization (0.01) after two-year slump
• North American supply chains operated near full capacity (-0.06)
• No significant cost inflation despite 10% U.S. tariffs
• Material shortages remain historically low with robust availability

Negative

• Southeast Asian factory purchasing continues to lag, particularly in China
• UK supply chains show elevated slack (-0.41)
• Increased stockpiling due to tariff and supply concerns
• Asia's supply chains remain underutilized overall (-0.27)

Insights

Global Trade Economist

Global manufacturing rebounding despite US tariffs, with Europe emerging from slump and businesses stockpiling ahead of tariff pause expiration.

The latest GEP Global Supply Chain Volatility Index shows significant improvement in global manufacturing activity, with the index rising to -0.17 in June from -0.46 in May. This represents the highest reading of 2025, indicating global supply chains are now operating near full capacity despite the 10% universal tariff imposed by the US administration.

What's particularly noteworthy is Europe's emergence from a two-year industrial slump. European manufacturers operated at full capacity (index at 0.01), driven by front-loaded orders from US customers anticipating the end of the tariff pause, plus rebounding domestic and export demand. Germany's export sector shows particular strength after prolonged weakness.

In North America, we're seeing clear evidence of strategic stockpiling as the index rose to -0.06 from -0.24. US manufacturers are accelerating purchases of inputs – commodities, parts, components, and raw materials – creating a demand surge ahead of potential changes to the current tariff pause. This tactical inventory building represents rational risk management given policy uncertainty.

Asian supply chains show modest recovery (index at -0.27 from -0.40), with stronger activity in India, Japan, and South Korea. However, significant excess capacity persists across Southeast Asia, particularly in China, where factory purchasing continues to lag despite global improvements.

Perhaps most surprising is the absence of significant cost inflation despite the tariff situation. This suggests either effective absorption of tariff costs in supply chains, successful rerouting of trade flows to minimize tariff impacts, or temporary price suppression as companies compete for market share during this transition period.

The data reveals companies are implementing multi-faceted contingency strategies: stockpiling inputs, reshaping supplier networks, near-shoring operations, and securing supply chain financing. These structural adaptations to trade policy uncertainty will likely have lasting effects on global supply chain architecture beyond any temporary tariff measures.

• Europe exits two-year slump, led by German export rebound and domestic demand recovery
• U.S. manufacturers purchasing surges ahead of U.S. 'tariff pause' ending
• Asia supply chains pick up, though capacity remains underutilized in Southeast Asia
• No signs of cost inflation escalation yet despite the 10% universal tariff imposed by the U.S.

CLARK, N.J., July 11, 2025 /PRNewswire/ -- GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses — jumped to -0.17 in June, from -0.46 in May, its highest in 2025 as worldwide supply chain activity picked up despite the 10% tariffs imposed by the US administration.

For the first time in more than two years, European manufacturers operated at full tilt, driven by front-loaded orders from US customers, and a rebound in both domestic and export demand, particularly across Germany.

In North America, demand for inputs surged as U.S. manufacturers moved quickly to secure inputs – commodities, parts, components and raw materials – ahead of a potential end to the current tariff pause.

Asia's supply chains also showed signs of recovery, with stronger activity in India, Japan, and South Korea. However, spare capacity remains across Southeast Asia, where factory purchasing continues to lag, notably in China.

Notably, there is no evidence in the data of cost inflation escalating dramatically, despite the tariffs.

"In June, Europe shook off its long slump and global supply chains ran at full capacity — despite the uncertainty and on-and-off again tariffs," said John Piatek, VP, Consulting, GEP. "But under the surface, companies are putting in place contingencies: stockpiling inputs, reshaping supplier networks, near-shoring operations, and securing supply chain financing."

Interpreting the data:
Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

Interpreting the data:
Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

JUNE 2025 REGIONAL KEY FINDINGS

• ASIA: Index rises to -0.27, from -0.40, indicating a pick-up in Asian market activity, but the region's supply chains remain underutilized overall. This mostly reflects subdued factory conditions in Southeast Asia.
• NORTH AMERICA: Index rises to -0.06, from -0.24 as US manufacturers ramp up purchasing sharply ahead of the tariff pause coming to an end. North American supply chains effectively ran at full capacity in June.
• EUROPE: Index rises to 0.01, from -0.30, signaling full capacity utilization across Europe's supply chains in June as the continent's industrial sector emerges from its prolonged downturn.
• U.K.: Index rises to -0.41, from -0.97, its highest for seven months, but still indicative of an elevated level of slack across the U.K.'s supply chains.

JUNE 2025 KEY FINDINGS 

• DEMAND: Global factory purchasing activity continued to trend upwards in June, with demand at its most robust in just over a year. This was driven by a considerable rise in North America, driven by the US, as manufacturers ramped up buying ahead of the pause on US tariffs coming to an end.

• INVENTORIES: There were increased reports from businesses of a rise in stockpiling due to price or supply concerns during June. Mentions of safety buffers being built into warehouses were their highest so far in 2025 globally, with the prospect of higher tariffs driving procurement managers into precautionary action.

• MATERIAL SHORTAGES: The global item shortages indicator, which measures the prevalence of supply problems, remains historically low, indicating robust availability.

• LABOR SHORTAGES: Suppliers' workforce capacity remains sufficient to process current order loads, according to our data. Reports of manufacturing backlogs rising due to staff shortages remain stable at historically typical levels.

• TRANSPORTATION: Global transportation costs were once again in line with their long-term average in June. Reports from surveyed businesses of logistic cost pressures remain anchored.

For more information, visit www.gep.com/volatility.
Note: Full historical data dating back to January 2005 is available for subscription. Please contact economics@spglobal.com.
The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, Aug. 12, 2025.

About the GEP Global Supply Chain Volatility Index

The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global's PMI® surveys, sent to companies in over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global. For more information about the methodology, click here.

About GEP

GEP® delivers AI-powered procurement and supply chain solutions that help global enterprises become more agile and resilient, operate more efficiently and effectively, gain competitive advantage, boost profitability and increase shareholder value. Headquartered in Clark, New Jersey, GEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.

About S&P Global

S&P Global (NYSE: SPGI) S&P Global provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world. We are widely sought after by many of the world's leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world's leading organizations plan for tomorrow, today.

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SOURCE GEP

FAQ

What is the current GEP Global Supply Chain Volatility Index as of June 2025?

The index improved to -0.17 in June 2025, up from -0.46 in May, reaching its highest level in 2025.

How are European supply chains performing in June 2025?

European supply chains reached full capacity utilization (index 0.01) for the first time in over two years, driven by U.S. orders and improved German domestic and export demand.

What is the impact of U.S. tariffs on global supply chain costs?

Despite the 10% U.S. tariffs, there is no evidence of dramatic cost inflation in the data, with transportation costs remaining at long-term average levels.

How are Asian supply chains performing in June 2025?

Asian supply chains showed improvement (index -0.27 from -0.40) with stronger activity in India, Japan, and South Korea, but remain underutilized, particularly in Southeast Asia and China.

What is driving U.S. manufacturing activity in June 2025?

U.S. manufacturers are rapidly increasing purchasing activity to secure inputs ahead of the potential end to the current tariff pause, bringing North American supply chains close to full capacity.