North American manufacturers reported a sharp pullback in activity in March due to tariffs, according to a monthly analysis from supply chain software firm GEP.
The company’s Global Supply Chain Volatility Index showed that supply chains’ spare parts capacity increased to its highest level since May 2020—the height of the Covid-19 pandemic—indicating “rapidly worsening conditions” for manufacturers, according to the report, which tracks demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses.
The data revealed a sharp decline in the number of companies building buffers into their stocks, with manufacturers’ stockpiling at its lowest level in nine years—highlighting caution among procurement leaders worldwide about future demand, the report’s authors wrote.
GEP
“March’s sharp decline in supplier activity was due to the stifling effect of tariffs and tariff-related uncertainty, which had its strongest impact in North America, where manufacturers reported cutbacks to purchasing activity and inventories,” John Piatek, GEP’s vice president, consulting said in a statement announcing the findings. “Until just last week, most companies had taken a wait-and-see approach. Now, organizations are aggressively exploring every possible way to eliminate costs, push suppliers to absorb tariffs, and de-risk their global supply chains.”
In North America, purchasing activity was down the most in Canada. The United Kingdom and Europe saw declines as well: In the U.K., supplier spare capacity rose for the fourth month to a level that has only been surpassed during either the Covid-19 pandemic or global financial crisis period. U.K. factories aggressively destocked and reduced spending during March, suggesting the country’s industrial sector is bracing for a downturn, according to the report.
The data also showed considerable slack across European supply chains, although in contrast to the U.K., there were “budding signs of recovery for the continent’s industrial sector as demand for raw materials, commodities, and components were down by the softest margin in almost three years,” the authors wrote.
In contrast, Asia’s supply chains were broadly running at full capacity. In March, the data showed a slight uptick in regional procurement activity, driven by China and India, according to the report.
GEP
