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Posted by: 6. June 2012

Industry Grows at Slower Rate

 
With a reading of 52.8, the May MBI showed that the metalworking industry continued to grow. However, the rate of growth was the second slowest since August 2009. Because the industry really hasn’t seen slower growth than this in the last 34 months, the next month or two will provide a good indication of where the industry is headed for the next six to 12 months.
 
In May, every single subindex either grew slower, improved less or contracted at a faster rate. This is a fairly good indication that there was a broad-based slowing in the growth of metalworking. While the slowdown touched all areas of the metalworking industry, new orders were virtually unchanged. Continued strong growth in new orders is a sign that this recent slowdown in the rate of growth will be short lived.
 
Production saw slower growth for the second straight month. But, production levels are still quite strong. Strong production levels led to faster contraction in backlogs. Even though backlogs contracted the last two months, metalworking facilities continue to hire new personnel at a good clip. Supplier deliveries continue to lengthen, which indicates strength throughout manufacturing. But, deliveries are lengthening at a slower rate.
 

The dollar has been gaining ground against world currencies, especially the Euro, in recent months. The relative movement in the dollar is a likely cause of exports contracting faster each of the last three months. Future business expectations are still strong. The index value is still above the long-term average. However, May was the lowest reading for future business expectations since June 2011. Finally, metalworking facilities are indicating that their rate of spending on capital equipment for the next 12 months will remain fairly similar to the amount spent in the last quarter or two.  

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