Business Activity Accelerates Thanks to New Orders and Employment

The metalworking manufacturing industry registered quickening expansion in February according to the Gardner Business Index (GBI): Metalworking with a 56.0 reading, up 2.5-points from January. The upward gains made by the overall index were driven by the growing proportion of metalworking shops which reported increasing new orders and employment. Strong new orders activity coupled with a relatively modest expansion in production activity since 4Q 2020 may explain the strong expansion now being witnessed in the latest backlogs reading.

Metalworking Business Index: The Metalworking Business Index reported expanding activity during February. Rising new orders, employment and backlog activity pushed the index higher. Slowing order-to-fulfillment times sent the supplier delivery reading to a new all-time high.

Production challenges may also be a result of challenging supply chain conditions. February’s supplier delivery reading -in excess of 71- places it well above the prior all-time high reading of nearly 66-points. Such elevated supplier delivery readings indicate that an overwhelming majority of metalworking shops are experiencing slowing order-to-fulfillment times for upstream goods and thus a restrictive cap on productivity.

Supply Chain Impairment is adding to the rise in material costs: The history of the GBI suggests that slowing supply chains can have an amplified effect on material prices.

Challenging supply chain conditions not only are impacting production but also input materials costs. The history of the Gardner Business Index (GBI) bears out this critical insight as manifested by the highly correlated movement of supplier deliveries and material prices readings. This relationship suggests that even limited disruptions to supply chains can result in significant price changes for upstream goods.

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