Falling demand signals slowing economic growth, report finds

According to the GEP Global Supply Chain Volatility Index, a fall in the demand for raw materials and semi-manufactured goods may indicate a slowing of economic growth.

The Index, a leading indicator of demand conditions, shortages, transportation costs, inventories and backlogs at more than 27,000 businesses, showed that worldwide supply chain spare capacity is rising, and that Asian factory demand is at its weakest since December 2023. The report said that in July underutilized capacity at global suppliers had fallen to a four-month low.

While the greatest level of slack in supply chains was in Europe, Asia saw cooled growth as well as factory demand contracted to its weakest in December 2023. Suppliers in North American companies reported slightly underutilized capacity during July, the same as they saw in June. Slowing purchasing activity was seen across all three countries in the region, with Canada reporting the steepest contraction. The report noted that Mexican factories reported lower input demand for the first time since October 2023.

“In July, purchasing activity by global manufacturers declined, indicating that economic growth is slowing, adding to the calls for the Federal Reserve to lower interest rates sooner rather than later,” Mike Jette, vice president of consulting with GEP, said. “This is not alarming data. The world’s supply chains continue to operate efficiently, with no sign of stockpiling, shortages, or price pressures. But to head off any material slowdown in the second half of the year, manufacturers do need demand to increase.”

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