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GBI: Metalworking September 2016 – 48.4

Continued moderate contraction indicates the industry has improved.
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With a reading of 48.4, the Gardner Business Index showed that the metalworking industry contracted at a moderate rate in September, virtually unchanged from August. In these two months, the index reached its two highest levels since March 2015, other than a spike in March of this year, so it appears that the industry has improved.

After one month of growth, the new orders subindex contracted at a moderate rate, however, the production subindex grew for the second month in a row, although at a slower rate than in August. While the backlog subindex continued to contract, as it has since March 2014, its trend indicates that durable goods capacity utilization should increase soon. Employment contracted for the 14th month in a row, and exports have contracted since March 2014, but their rate of contraction in September was the slowest since December 2014. Supplier deliveries lengthened for the seventh straight month and at their fastest rate since March 2015.

Material prices have increased since March at a rate faster than at any time since late 2014, but that rate of increase has decelerated since June. Prices received decreased in September at a very minimal rate for the second month in a row, having decreased at a slower and slower rate since November 2015. Future business expectations improved for the third month in a row, reaching their highest level since July 2015, other than the spike in March.

While the number of survey responses was limited, the oil/gas/mining machinery industry grew in September for the first time since October 2015. As was the case in August, custom processors and plastic/rubber product manufacturers both reported strong growth. Presumably, if these facilities are cutting metal, it’s to make dies and molds. Machinery/equipment manufacturers grew for the second time in three months, and primary metals manufacturers grew for the first time since November 2015.

In September, we changed how we asked about future capital spending plans. Respondents were given the option of selecting simply $0 for future spending plans, instead of a range of $0 to $125,000. For this reason, we cannot compare this month’s results to those of previous months.