Metalworking Activity Contracts Further as Coronavirus Disruption Continues
The Gardner Business Index (GBI): Metalworking reported back-to-back monthly all-time lows as it fell to 34.4, surpassing the prior all-time low by nearly 10 points. The coronavirus-induced trends from March worsened in the April data.
Metalworking Business Index: The metalworking industry continues to be challenged by the COVID-19 pandemic. As economies reopen in the near-term, we expect the Metalworking Index to be an early indicator of improving conditions.
Gardner Intelligence’s review of the six underlying industry components — whose average is calculated for the reading — indicates that the index was brought lower by changes in new orders, production and backlogs. New orders and production are considered directionally leading indicators of backlogs and employment in following months.
As with last month’s report, it is important to remember that these readings represent the breadth of change occurring the metalworking industry is experiencing and are not to be confused with the rate of decline taking place. These low readings indicate only that a large proportion of metalworking manufacturers reported some decreased level of business activity without quantifying the magnitude of the downward change.
New Orders and Production Extend March’s Contractionary Readings: The Metalworking Index set back-to-back all-time lows at the end of April led by a further decline in new orders and production activity. Both measures are harbingers of the future movement of production and employment activity.
The reading for supplier deliveries also extended its upward progression from March. As addressed in our March report, the world’s efforts to slow the spread of COVID-19 has significantly disrupted supply chains worldwide. It is this disruption that is slowing deliveries and thereby raising the supplier delivery reading. During the course of a normal business cycle, the supplier delivery measure is designed to increase when strong demand for upstream goods results in growing upstream backlogs. As these backlogs grow, they lengthen delivery times for input goods. It is for this reason that the supplier delivery is calculated differently from its peer components.
The GBI: Metalworking has reached a reading of 62.8, with most of the Index components at or near all-time highs.
With a reading of 43.3, Gardner’s Metalworking Business Index showed that the industry contracted in August for the fifth month in a row to its lowest level since July 2009, when the index was 36.5.
Slow supply chains and rising prices are still challenges in the near-term.