Reports of safety stockpiling rose to their highest level since January 2023, as companies bulk ordered goods and raw materials ahead of expected price increases and potential supply disruption.
Global supply chains are much strained as manufacturers front-load purchasing to guard against expected higher prices in 2026 second half, S&P Global said.
Safety stockpiling, shortages and transportation costs have all been higher for three months in a row, a rare signal.
North America supply chain pressures have risen to their highest since August 2022.
Asia remains under the greatest strain globally.
This frontloaded purchasing pushed global demand for inputs to its strongest since March 2022.
Shortages also worsened in May, reaching their highest level in three-and-a-half years, S&P Global said in a press release.
Combined with elevated transportation costs, the data shows that supply chain pressures are no longer limited to shipping and energy markets. May’s data also points to a rare pattern: for three consecutive months, stockpiling, shortages and transportation costs have all been elevated.
Outside the 2021-23 supply chain crisis, this has typically been followed by a sharp fall in the index as supply chains self-correct, often through weaker input demand or deteriorating economic conditions.
The index fell from 3.79 to 2.96 in Asia, signaling a slight easing of pressures versus April. Nonetheless, it was indicative of significant supply chain stress for manufacturers in the continent.
In North America, the index rose to 1.69, from 1.52, its highest level since August 2022. Stronger purchasing activity, particularly in the United States, and greater stockpiling, drove the rise in supplier capacity pressures.
The index fell to 1.43 in Europe from 1.64 as factory purchasing volumes across the continent were tapered. This reflected fresh signs of weakness in the German and French manufacturing economies.
The index rise to three-and-a-half year high of 1.34 in the United Kingdom from 0.96 in April, pointing to greater capacity constraints for suppliers used by UK manufacturers.
Global demand for raw materials, commodities and intermediate goods required by manufacturers continued to strengthen in May, seeing its strongest rise since March 2022. Growth accelerated across North America, driven by the United States, and also Asia. Factories in Japan, India, South Korea and Taiwan reported more aggressive purchasing activity in May. Meanwhile, reduced procurement in Germany and France caused a European slowdown.
Reports of inventories rising due to price or supply concerns rose further, marking a sustained increase since the war in the Middle East and effective closure of the Strait of Hormuz commenced. Safety stockpiling was at its most prevalent since January 2023, with manufacturers in Asia, Europe and North America building warehouse buffers more aggressively in May.
The items in short supply indicator ticked up in May, signalling that worldwide shortages worsened from April and were the highest in three-and-a-half years. The combination of low supply and stockpile-driven demand is exerting significant upward pressure on factory gate prices.
Manufacturing workforces are not inhibiting capacity, as reports of backlogs rising due to labor shortages were aligned with historically average levels.
After soaring to a record high in April since 2005, transportation cost pressures eased slightly in May as global oil prices stepped down from the peaks seen since the war in the Middle East began. Nevertheless, they remained the second-strongest since March 2022, following Russia’s full-scale invasion of Ukraine.
Fibre2Fashion News Desk (DS)
