August Metalworking Business Index: Industry Growth Flattening
With a reading of 49.5, the Metalworking Business Index showed that the metalworking industry has contracted for the second month in a row, but the two months of contraction have been extremely shallow. Because the index compares the current month’s activity with the previous month’s activity, the index is saying that overall, the metalworking industry currently is performing at a level just below the peak activity of this cycle.
Also, the graphs for the overall index and sub-indices had been declining for five or six months. However, the downward trend line in each graph appears to have been broken in August. We will need to see a couple more months of data before that call can be made definitively.
All but one sub-index had a positive percent change in August. New orders continued to contract but did so more slowly. Production increased in August. New orders will need to start growing again for this to continue. Backlogs contracted more slowly. New orders will need to grow or production slow down 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 healthcare 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.