1/9/2020 | 1 MINUTE READ

Metalworking Index Improves, Led by Supplier Deliveries

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All components end 2019 reporting higher readings than the previous month.

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The Gardner Business Index (GBI): Metalworking closed 2019 registering an improved reading of 48.2. Index readings above 50 indicate expanding activity while values below 50 indicate contracting activity.  The further away a reading is from 50, the greater the magnitude of change in business activity. The Index’s recent upward movement toward 50 indicates that business activity is contracting more slowly than in the prior month. Gardner Intelligence’s review of the underlying index components observed that the Index, which is calculated as an average of its components, was supported by an expansion in supplier deliveries. We saw no change in new orders and slightly contracting activity in exports, production and employment (although the contraction of those three components in January is less than December). Only backlogs prevented the Index from moving higher. Backlogs ended the year registering a sharp contractionary reading.

GBI: Metalworking – Backlogs (3MMA)
Backlog activity contracted faster than any other Index component during the second half of 2019. This was driven in part by the relatively faster contraction in exports and new orders activity as compared to production.

2019 was a year of transition for the Metalworking Index. The start of the year saw all components except exports continue their expansionary trends first observed in early 2017. Data collecting during the first quarter witnessed slowing growth in backlogs as new orders growth was outpaced by production gains. It was not until the second half of the 2019 that new orders activity abruptly slowed with July’s reading registering the first contraction in new orders since late 2016. The sharp transition in new order activity resulted in a steep contraction in backlogs, a trend that would be exacerbated throughout the remainder of 2019.