ODDS OF A SOFT LANDING FOR THE U.S. ECONOMY ARE RISING AS MANUFACTURING STABILIZES IN SEPTEMBER, BUT RECESSION ALARM BELLS RING FOR EUROPE

GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX

• The downturn in global demand for commodities and raw materials is stabilizing, but we're yet to see any signs of improvement
• Europe is by far the globe's biggest weak spot, as plummeting demand in major economies such as Germany and France raises recession risks
• By contrast, excess capacity across North American supply chains increases by the smallest margin since April, hinting at soft landing
• Asian suppliers report an uplift in spare capacity due to deteriorating economic conditions after a relatively resilient year-to-date

CLARK, N.J., Oct. 13, 2023 /PRNewswire/ -- The 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 — fell from -0.18 in August to -0.35 in September, with a sharper increase in excess capacity across the world's supply chains.

Notably, Europe was the principal driver of September's sharper rise in idle vendor capacity, with suppliers to the continent registering one of the highest levels of spare capacity since the global financial crisis between 2008 and 2009 amid considerable weakness in demand, thereby signalling elevated recession risks.

In stark contrast, excess supplier capacity within North America rose by its smallest margin since April, signalling increased odds of a soft landing for the U.S. economy. Although demand remains under pressure, the decline is slowing, and some companies are reporting price increases from their vendors.

Asian suppliers, after displaying relatively greater resilience in the year-to-date, reported greater spare capacity for the first time since July, reflecting a slump in purchasing activity. This suggests manufacturers in the region are preparing for lower production schedules.

Commenting on the September data, Jagadish Turimella, chief operating officer and co-founder, GEP, explained: "We're now into our sixth consecutive month of notable excess supplier capacity globally, but the good news is it's not getting substantially worse, except in Europe, where recession seems likely. By contrast, we expect U.S. suppliers and businesses to be steady for the rest of the year, unless the labor disputes in health care and the auto sector spread, or there is a price spike in oil, its derivates or agricultural commodities."