GEP: Global Manufacturing Levels Rose in February, Led by Asia

Why It Matters

The shift signals a geographic rebalancing of manufacturing demand and heightened exposure to energy and tariff risks, prompting firms to adjust sourcing and cost‑management strategies.

Key Takeaways

• Asia index jumps to 0.40, highest since Oct 2022
• North America index falls to -0.26, indicating underused capacity
• Europe recovers, index rises to 0.05
• War with Iran creates oil supply shock, raising costs
• US firms urged to secure price cuts after tariff ruling

Pulse Analysis

The February reading of the GEP Global Supply Chain Volatility Index underscores a broader cyclical upswing in manufacturing, with Asian supply chains operating at peak capacity for the first time in over three years. Derived from S&P Global’s extensive PMI surveys, the index aggregates sentiment, order volumes, and commodity price signals across 40+ countries, offering a granular view of where supplier capacity is stretched or idle. Asia’s jump to a 0.40 score reflects robust demand in China, Japan, India, South Korea and Taiwan, suggesting that firms are replenishing inventories and launching new projects after pandemic‑induced slowdowns.

Conversely, North America’s slide to –0.26 reveals a pullback in U.S. factory purchasing, hinting at a potential softening of domestic demand or a strategic shift toward offshore sourcing. The divergence is amplified by geopolitical tensions; the ongoing war with Iran is already disrupting oil supplies, inflating energy and shipping costs across the board. Coupled with the U.S. Supreme Court’s recent tariff ruling, manufacturers face a dual pressure to lock in lower supplier prices while hedging against volatile freight rates. Supply‑chain leaders must therefore prioritize risk assessments that factor in energy price exposure and tariff‑driven cost structures.

Looking ahead, the index suggests that companies should diversify their supplier base, especially by strengthening ties with Asian partners that are currently operating at high capacity. Investors will watch these trends closely, as sustained Asian demand could boost regional earnings, while continued underutilization in North America may signal a need for capacity‑building investments. Continuous monitoring of the GEP index, alongside traditional PMI metrics, will be essential for firms aiming to navigate the evolving global manufacturing landscape and maintain resilient, cost‑effective supply chains.