With a reading of 49.5, the August Metalworking Business Index showed that the metalworking industry contracted for the second month in a row, but the two months of contraction were extremely shallow. The index works by comparing the current month’s activity to previous month’s activity, so August’s index is saying that overall, the metalworking industry is performing at a level just below the peak activity of this cycle. Also, the graphs for the overall index and subindices had been declining for five or six months. However, the downward trend line in each graph appears to have broken in August. We will need to see a couple more months of data before that call can be made definitively.
All but one subindex had a positive percent change in August. New orders continued to contract, but did so more slowly. Production increased in August, but new orders will need to start growing again for this to continue. Backlogs contracted more slowly. New orders will need to grow or production needs to slow for this to be a continuing phenomenon. Employment continues to increase in the metalworking industry. Supplier deliveries are still lengthening, indicating strength throughout manufacturing, but they are lengthening more slowly.
While future business expectations have been muted (with the passing of health care reform and the presidential election probably playing a significant role), expectations improved in August. Future expectations still are slightly below average since the inception of the MBI, but they are back above the previous lows in this expansionary cycle. Planned capital spending over the next 12 months has remained relatively flat. This could be an indication that businesses are not concerned enough about the future to alter their investment plans.
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