Steve Kline, Jr. has been providing financial analysis and economic forecasts for Gardner Publications, Inc. (publisher of Modern Machine Shop) since 2005. While he has a degree in civil engineering from Vanderbilt University and a MBA with an emphasis on finance from the University of Cincinnati, Steve views forecasting as more of an art than a science. Therefore, his analysis focuses on trends between different data sets to determine where the economy (and, more importantly, the metalworking industry) may be headed. The study of economics is his life’s passion, hence the T-shirts of his favorite economists. Yes…any time he wears these, his wife points out that he truly is a geek.
With a reading of 53.6, Gardner’s April metalworking business index showed that the metalworking industry continues to grow at a fast pace. In each of the first four months of this year, the index has been above 53.0, and the industry grew six of the last seven months. The metalworking industry is still on the uptrend that began in August. In April, the index was 10.5 percent higher than it was one year earlier, the second month in a row that it grew by more than 10 percent. Annually, the industry has grown at an accelerating rate the last two months.
New orders increased for the seventh month in a row, at a steadily accelerating rate. Production also has expanded for seven months, and in recent months it has increased slightly faster than new orders. Therefore, backlogs contracted two out of the previous three months. Yet, compared to one year earlier, backlogs are increasing at a rapid rate. The annual rate of change in backlogs continues to accelerate, which is a positive sign for future capacity utilization levels and capital spending. Employment has expanded since October, but the rate of hiring slowed slightly in April. Exports began to contract once again, while supplier deliveries continued to lengthen at a rate similar to what we have seen since November.
Material prices have increased at a noticeably faster rate in 2014 compared to 2013. However, prices received contracted in April for the first time since August. Future business expectations remain strong even though they have fallen from their high level in the first three months of the year.
After contracting for two months, future capital spending plans increased in March and then again in April, when they were 17.9 percent higher than a year earlier. That is the strongest month-over-month rate of change since November, and it moved the annual rate of change back into positive territory.
With a reading of 55.9, Gardner’s metalworking business index showed that conditions in the industry expanded in March for the third straight month and the fourth time in five months. This was the fastest rate of growth since March 2012. Since August, the metalworking industry has been on a steady and significant uptrend. The March index was 10.9 percent higher than it was in March 2013, which is the seventh straight month of year-over-year growth. Also, March was the fastest rate of month-over-month growth so far this year. The annual rate of change grew for the first time since September 2011.
New orders and production grew for the sixth consecutive month, both at significantly faster rates than the first two months of the year and at their fastest rates since March 2012. The backlog index also grew for the second time in three months, indicating that capacity utilization and capital spending at metalworking facilities should increase significantly this year. Employment has grown at a consistently high rate in each of the first three months of the year, similar to the rates of growth at the end of 2011 and beginning of 2012. Exports were flat, the first time they have not contracted since September 2011. Supplier deliveries continue to lengthen at a steadily increasing rate as they have done since last June.
Material prices continued to increase, but they did so at the slowest rate of the first quarter. Prices received increased for the fourth straight month, but the increase was minimal in February and March. Future business expectations remain strong and have been very stable throughout the quarter.
After contracting the first two months of 2014, future capital spending plans improved 2.7 percent in March compared to one year earlier. Despite this improvement, however, the annual rate of change contracted at a faster rate for the second consecutive month.
With a reading of 53.4, Gardner’s metalworking business index showed that conditions in metalworking continued to expand at a significant rate in February. The industry has grown four of the last five months, although February’s rate of growth was slightly slower than the rate of growth in January. The index was 7.7 percent higher than it was one year earlier, which is the sixth straight month that has happened.
New orders and production grew for the fifth consecutive month. While the rate of growth slowed slightly for both indices in February, they remain on uptrends that started in August 2013. The backlog index contracted slightly after growing in January for the first time in nearly two years. The trend in backlogs indicates that capacity utilization and capital equipment spending in the metalworking industry should increase in 2014. Employment grew at the same strong rate as January, while exports continued to contract, although at one of the slower rates in the last 18 months. Supplier deliveries have been lengthening at a slightly increased rate since August 2013.
Material prices increased at a faster rate in February and are growing at their fastest rate in a year. Prices received increased for the third month in a row; however, they are increasing at a much slower rate than material prices. Future business expectations were unchanged from January and are at their highest level since March 2012.
The rate of growth increased at facilities with 20 or more employees, while shops with fewer employees contracted once again after growing in January.
Future capital spending plans fell 20.4 percent compared with one year earlier. This was the second month in a row that the month-over-month rate of change contracted. The annual rate of change contracted in February after growing the previous three months
With a reading of 54.2, Gardner’s metalworking business index for January showed that conditions in the metalworking industry have improved dramatically. The industry has grown three of the last four months, but January’s rate of growth was the fastest since April 2012. The index was 9.1 percent higher than it was one year ago, the fifth straight month that has happened.
New orders grew for the fourth consecutive month, reaching their highest level since March 2012. Production also has grown for four straight months, reaching its highest level since April 2012. Importantly, the backlog index grew for the first time in nearly two years, and the trend indicates that capacity utilization in the metalworking industry should increase in 2014. Employment is growing at its fastest rate since summer 2012. Exports continued to contract, and at a faster rate in January, likely due to the start of tapering by the Federal Reserve and its effect on many world currencies. Supplier deliveries continue to lengthen at a rate consistent with the last year.
Material prices increased at a notably faster rate in January than they did throughout 2013. Prices received grew significantly faster as well, however not as fast as material prices. Future business expectations have soared since last August and are now at their highest since March 2012.
For the first time since March 2012, plants of all sizes grew. Facilities with more than 50 employees saw their rate of growth jump significantly, while plants with 20-49 employees grew for the first time since last July. Facilities with fewer than 20 workers grew for the first time since March 2012.
Future capital spending plans reached their highest level since February 2013, but they fell just slightly from last January. The annual rate of change of future spending plans has grown for three straight months, indicating that actual capital spending should grow faster in upcoming months.
With a reading of 49.9, Gardner’s metalworking business index (MBI) showed that conditions in the metalworking industry were unchanged from November. This comes after two months of modest growth. While the index was essentially flat in December 2013, it was 11.4 percent higher compared to December 2012. This was the fourth month in a row that the index was higher than it was one year ago, and it was the second consecutive month that the rate of growth was more than 10 percent. So, even though the index is not indicating strong growth, it is indicating that the industry has improved significantly compared to a year ago.
The most significant reason for the slight decline in the index was the slower growth in production. The production subindex recorded the largest change of the six subindices that are used to calculate the overall index. The most likely reason for the slower growth in production was the Christmas and New Year’s holidays fell during the middle of the week, which likely led plants to close for longer than normal. Otherwise, it would have been unlikely for production to slow with new orders continuing to grow faster. Backlogs continued to contract at a similar rate. However, the trend in backlogs indicates that capacity utilization should increase significantly in 2014. Employment growth slowed in December. Exports contracted at their slowest rate since April 2012. Supplier deliveries continued to lengthen at a decent pace, which indicates relatively good conditions throughout the supply chain.
Material prices have increased at a relatively constant rate since April 2013. Prices received were largely unchanged throughout 2013, but in December they increased at their fastest rate since February 2013. Future business expectations improved notably since August 2013, reaching their highest level since April 2012.
Plants with more than 50 employees grew for at least three months, depending on how large the facility is. Plants with fewer than 50 employees continued to contract. However, the rate of contraction at smaller facilities continued to slow down.
The West South Central region grew at the fastest rate in December. It grew faster the previous two months. New England grew at the next fastest rate, and it grew three of the previous four months. The South Atlantic region grew for three straight months while the Mountain region grew five of the last six months. The East North Central, West North Central, and Pacific contracted in December after growing in November. The Middle Atlantic and East South Central remained stuck in a prolonged contraction.
Future capital spending plans grew month-over-month for the fourth consecutive month. The annual rate of change grew faster the last two months, which is a very positive for capital equipment spending in 2014.