Global demand for raw materials hits 2024 low in July

Asia's factory demand is at its weakest since December 2023.

The global demand for raw materials and semi-manufactured goods weakened in July at the fastest rate this year, signaling a slowdown in economic growth, according to the GEP Global Supply Chain Volatility Index.

The index, based on a monthly survey of 27,000 businesses tracking demand conditions, shortages, transportation costs, inventories, and backlogs, indicated underutilised capacity at global suppliers for the first time since April, falling to a four-month low.

Europe experienced the most significant slack in supply chains, particularly in Germany, where recession conditions persist in the manufacturing sector.

In Asia, factory demand contracted to its weakest level since December 2023.

Chinese factories reported a decrease in purchasing activity for the first time in nine months, whilst Japan's manufacturing sector also showed weakness.

In North America, suppliers reported slightly underutilised capacity in both July and June.

Purchasing activity slowed across all three countries in the region, with Canada experiencing the sharpest contraction.

Mexican factories, which have been driving growth in the region, reported lower input demand for the first time since October 2023.

Mike Jette, Vice President of Consulting at GEP, explained that the decline in purchasing activity by global manufacturers in July indicates a slowdown in economic growth, prompting calls for the Federal Reserve to lower interest rates sooner rather than later.

While the data is not alarming and supply chains are still operating efficiently, manufacturers need to see an increase in demand to prevent a significant slowdown in the second half of the year.