The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs — shows declining demand for raw materials, commodities and other components needed to provide finished goods and services in December, reflecting the growing risk of a recessionary period ahead.
Additionally, more businesses are safety stockpiling inventories, particularly in Europe and North America, due to a resurgence in COVID-19 infections in China and increased concerns about future supply and pricing, partly reversing destocking efforts seen in the prior six months.
As a result of greater safety stockpiling and worsening of labor shortages, the GEP Global Supply Chain Volatility Index rose — up from 1.15 in November to 1.61 in December — halting the improvements in the world’s supply chains, which began in the summer of 2022.
Commenting on the latest results, John Piatek, GEP’s vice president of consulting, said: “We are shifting from a sellers’ to a buyers’ market, and companies should be pushing back hard on all price increases from their suppliers, which will continue to drive down inflation. Falling demand signals the increasing likelihood of a global recession in the first half of 2023.”
The key findings from December’s report:
The GEP Global Supply Chain Volatility Index is produced by S&P Global and Clark, New Jersey-based GEP. The GEP Global Supply Chain Volatility Index is derived from S&P Global’s PMI™ surveys, sent to companies in over 40 countries, totaling around 27,000 companies. These countries account for 89% of global gross domestic product (GDP) (source: World Bank World Development Indicators).
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