Metalworking Index: Strong Production and Supplier Deliveries Decrease Backlog Growth

Although the Gardner Business Index (GBI): Metalworking moved lower in November to 54.7, it registered its 23^rd consecutive month of expansion. The expansion rate of the metalworking industry is now on par with the slightly slower pace measured during mid 2017. Including this reading, however, the 2018 calendar year will likely be the fastest expanding year in recorded history. The year-to-date average reading of 58.1 is several points higher than 2017’s record of 55.8. Gardner Intelligence’s review of the underlying index data found that the index was supported by supplier deliveries, production and new orders. Conversely, employment, backlogs and exports all pulled the average-based index lower. All component readings for November reported expansion, including exports, which contracted during the prior two months.

The latest data indicate that supplier deliveries continue to expand at an unprecedented rate. For the 10^th consecutive month, the supplier deliveries component reading has registered 62.0 or higher. For reference, the highest reading ever recorded for supplier deliveries prior to 2018 was 59.3. Both new orders and production, which have been pillars of the strength of the Metalworking Index this year, recorded significantly slower growth in November. In addition, the index’s employment and backlog components, which have been slight drags during 2018, both moved considerably lower in November, dragging the index down more sharply.

The significant fall in backlogs may be the natural result of several quarters of unprecedented expansion in supplier deliveries and strong production levels. The increase in supplier and production capacity during the last 18 months has meant that manufacturers are now able to reduce their backlogs even though new orders are good by historical standards.