December Index at 49.1

Contraction Extends to Second Month

With a reading of 49.1, the Gardner Business Index showed that the finishing industry contracted for the second month in a row. However, compared to one year ago, the index increased by 1.0 percent in December. The annual rate of growth slowed to 6.7 percent. This was the third month in a row that the annual rate of growth decelerated.

New orders expanded for the second time in three months. Production was flat in December. This was the first time production had not expanded since December 2013. The backlog index continued to drop even further. It has contracted for six straight months and is at its lowest level since November 2012, though December was the first time that the month-over-month rate of change in backlogs contracted since August 2013. The annual rate of change is still growing, albeit at a slower rate. This indicates that capacity utilization and capital investment should increase in the first half of 2015. December was the first time in 2014 that employment contracted. Exports expanded for the first time since June. Supplier deliveries have lengthened at a slower rate since August.

Material prices increased at a noticeably slower rate throughout the second half of 2014, the slowest since September 2013. Prices received by finishers increased for the fifth time in seven months. Future business expectations surged in December. They are at their highest level since the index began in December 2011.

After contracting last month, facilities with more than 250 employees expanded at a similar pace to what they had from November 2013 to October 2014. Plants with 100-249 employees continued to expand at a decent clip. But business conditions aren’t nearly as good at smaller facilities. Shops with 50-99 employees contracted for the first time since July. Finishers with 20-49 employees contracted for the third time in four months. Finishers with fewer than 20 employees were flat. That’s the first time they haven’t contracted since August 2012.

The only region to grow in December was the Southeast, and it grew at its fastest rate since March 2013. That region has grown for five straight months. North Central – East contracted at a very modest rate. The Northeast, West, and North Central – West regions all contracted as well.

Future capital spending plans decreased 28.2 percent compared to December 2013. This is the second month in a row that the month-over-month rate of change contracted by more than 25 percent. It has contracted four of the last six months. The annual rate of change contracted for the first time since July.