CLARK, N.J. – The GEP Global Supply Chain Volatility Index, based on a monthly survey of 27,000 businesses, signaled continued pressure on global supply chains in May as manufacturers increased purchases and built safety stocks to protect against rising inflation.

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. This front-loaded purchasing pushed global demand for inputs to its strongest since March 2022.

Shortages also worsened in May, reaching their highest level in more than three years. 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, according to the report. 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 path for inflation is already being set, and companies are trying to limit the damage,” said John Piatek, vice president, consulting, GEP. “The surge in purchasing we saw in April and May is likely temporary. Once companies have built inventory, they and their customers will pull back, which means supply chain pressures may ease. But even if the Strait of Hormuz is opened fully, economic conditions will likely weaken in the second half of the year as companies will pull back on their input purchasing to draw down the inventories they’ve built up.”

Key findings include:

  • Demand: 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 U.S., 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.
  • Inventories: Reports of inventories rising due to price or supply concerns rose further, marking a sustained increase since the conflict in the Middle East and effective closure of the Strait of Hormuz began. 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.
  • Material shortages: The items in short supply indicator ticked up in May, signaling that worldwide shortages worsened from April and were the highest in more than three years. The combination of low supply and stockpile-driven demand is exerting significant upward pressure on factory gate prices.
  • Labor shortages: Manufacturing workforces are not inhibiting capacity, as reports of backlogs rising due to labor shortages were aligned with historically average levels.
  • Transportation: After soaring to a record high in April (since 2005 when data were first available), transportation cost pressures eased slightly in May as global oil prices stepped down from the peaks seen since the conflict in the Middle East began. Nevertheless, they remained the second-strongest since March 2022, following Russia’s full-scale invasion of Ukraine.