Global supply chains are showing the sharpest divergence in nearly three years, according to the latest GEP Global Supply Chain Volatility Index, as China’s factory resurgence drives Asia’s busiest production stretch since mid-2022 while North American and European manufacturers continue to slow.

The index held broadly steady in September at -0.38, compared with -0.39 in August, signalling that supply chains are still operating below full capacity overall. Yet behind the flat global average, regional dynamics have shifted sharply. Chinese manufacturers ramped up purchasing and production at the fastest rate in more than a year, lifting the broader Asian region close to full utilisation. In contrast, tariff-related disruptions and mounting economic caution dragged down activity in North America, while Europe’s fragile recovery lost further ground.

The findings underline the uneven nature of the post-pandemic industrial landscape. Supply bottlenecks and price shocks that once dominated boardroom concerns have largely receded, replaced by weaker demand in the West and renewed expansion in Asia. This pattern could reshape trade flows and capital allocation decisions in the months ahead.

Asia’s factories lead the global upturn

China was the clear growth engine in September. GEP data show a sharp rise in input purchasing as the world’s second-largest economy accelerated production and sales. The uplift pushed Asia’s supply chains to their busiest level in more than two years, signalling that industrial output across the region is returning to strength after a prolonged slowdown.

Analysts point to a combination of factors: restocking ahead of year-end, stabilising domestic demand, and tentative improvement in export orders as global inventories normalise. The rebound in procurement also suggests manufacturers are regaining confidence in supply reliability, with fewer reports of shortages or logistics constraints.

For multinational corporates, the shift matters. Firms that rely on Asian suppliers are likely to see improved delivery times and reduced input volatility, easing the strain on working capital and production schedules. However, a renewed acceleration in China could also revive competitive pressures on Western manufacturers struggling with higher costs.

Across Asia more broadly, factory purchasing recorded its strongest growth in ten months, according to GEP. That momentum contrasts sharply with the restraint seen elsewhere, reinforcing Asia’s position as the centre of gravity for global production.

North America slows as tariffs and caution take hold

On the other side of the Pacific, North American supply chains lost momentum in September. GEP’s report attributes the slowdown to tariff-related delays and a more uncertain economic outlook, prompting many manufacturers to scale back purchasing and reduce inventories after a surge in August.

The region’s trade friction has grown as Washington’s tariff measures against China and selected imports from Mexico and Europe take effect, disrupting parts of the automotive and electronics supply chain. Many firms have responded by tightening procurement budgets and focusing on near-term liquidity, a strategy reflected in smaller inventory buffers and slower order volumes.

“This is the new normal for global companies - higher prices, tariff pressure, and slower growth are here to stay,” said John Piatek, Vice President, Consulting, GEP. “For supply chain leaders who’ve been waiting to see how things settle: stop waiting for stability and start executing their revised strategies.”

The sentiment mirrors broader caution in North American manufacturing surveys, where both output and new orders have softened since mid-summer. For treasurers and CFOs, the combination of weak demand and rising trade costs is pushing firms to rethink hedging strategies, manage cash more tightly, and reassess supply-chain financing needs heading into year-end.

Europe's recovery still out of reach

In Europe, supply chains remain underused as industrial momentum continues to lag. GEP’s index for the region fell to its lowest level since March, with Germany, France, and Italy all reporting weaker purchasing and smaller stockpiles.

Energy prices, subdued external demand, and tighter financing conditions have prolonged the downturn in European manufacturing. Even as inflation pressures fade, many producers are struggling to justify replenishing inventories without clearer signs of growth.

For multinational firms operating across Europe, this ongoing weakness translates into fragmented production planning and extended lead times. Treasurers face a delicate balance between conserving cash and maintaining operational readiness if demand rebounds unexpectedly. While some improvement in logistics has reduced immediate cost pressures, the region’s industrial base remains well below its pre-pandemic rhythm.

The UK, though slightly improved, also remains in contraction territory. Its index rose to –0.57 from –0.90, signalling that manufacturing activity is still subdued despite modest signs of stabilisation.

Global indicators show stabilisation, not strength

Beyond the regional contrasts, the September data show that global supply chains are settling into a more predictable, though still muted, rhythm. Inventories continued to decline, suggesting that procurement leaders feel less urgency to stockpile materials against future price rises or shortages. The frequency of supply shortages also eased further, with factories reporting little difficulty sourcing components and intermediate goods. Labour availability improved, as backlogs linked to staffing constraints fell to a six-month low.

Transportation costs, which spiked during the pandemic, have now normalised. GEP’s data indicate that global shipping and freight rates were broadly in line with long-term averages in September, marking a return to stability after several years of volatility.

Taken together, these signals suggest that supply chains have largely adjusted to post-pandemic realities. The primary challenge now lies on the demand side, ensuring sufficient orders and investment to justify further production growth.

A two-speed world for global manufacturing

The September report reinforces a broader theme shaping corporate strategy: global manufacturing is moving at two speeds. Asia, led by China, is expanding rapidly, while North America and Europe are treading water. For supply-chain and finance leaders, this divergence complicates planning, risk management, and currency exposure.

In Asia, capacity utilisation is rising and confidence is improving. In the West, firms are managing through uncertainty by scaling back procurement, trimming inventories, and seeking efficiencies wherever possible. The challenge for treasurers will be to maintain agility in capital allocation: balancing investment in growth regions with cost control in slower markets.

GEP’s findings also hint at a possible realignment of trade flows. As Asia’s production network strengthens, Western firms may become more dependent on the region’s output just as geopolitical and tariff pressures mount. That dynamic could heighten the need for diversified sourcing and more sophisticated risk management across supply chains.

While global supply-chain volatility has subsided from its pandemic highs, stability remains elusive. The index’s persistent negative reading shows that spare capacity still exists and that recovery is uneven.

As John Piatek of GEP noted, waiting for the old normal to return is no longer an option. For corporates navigating the next phase of the cycle, the focus will be on execution: adapting to regional realities, building resilience into procurement, and ensuring the flow of goods and capital remains as flexible as the markets they serve.