Global supply chains show vulnerability despite July cooling

The survey, which tracks conditions across 27,000 businesses, suggests that the frantic inventory building seen throughout the second quarter of 2026 has finally crested. Manufacturers, sensing a stabilization in risk, began drawing down safety stocks, contributing to the most significant monthly improvement in supply chain conditions since March. Despite this, the underlying infrastructure remains tight; reports of critical items in short supply stayed at elevated levels, and production delays continued to mount.

Regional divergence remains sharp. Asia and North America continue to drive the bulk of global manufacturing demand, though activity in both regions slowed compared to previous months. Europe presents a starker picture, with the index falling to 0.68 as factory retrenchment persists across the continent. The United Kingdom saw the most dramatic shift, with its index dropping to 0.30 as firms aggressively liquidated existing stocks.

These findings provide a baseline snapshot of the global economy just before the latest disruption to shipping through the Strait of Hormuz. Because the surge in oil prices and geopolitical volatility occurred at the tail-end of the month, the current index likely underestimates the immediate impact on global logistics. With supply bottlenecks unresolved, the manufacturing sector enters the third quarter with limited margin for error.