Gardner Business Index: August 2016

With a reading of 46.8, the Gardner Business Index showed that the finishing industry contracted for the 14th consecutive month. In August, the index improved from the previous month. However, the index was roughly at its average level since August 2015, indicating a relatively constant rate of contraction in the finishing industry.

With a reading of 46.8, the Gardner Business Index showed that the finishing industry contracted for the 14th consecutive month. In August, the index improved from the previous month. However, the index was roughly at its average level since August 2015, indicating a relatively constant rate of contraction in the finishing industry.

Even though new orders contracted for the 14th straight month, the rate of contraction was negligible. While technically contracting, the new orders index was virtually flat in four of the eight months this year. The production index increased for the first time since November 2015. The backlog index continued to contract in August. The index in July and August was notably lower than it was March to June. Employment contracted for the second month in a row after two months of expansion. Exports continued to contract. The index dropped quite a bit the last two months, falling to its lowest level since January. Supplier deliveries shortened for the first time since February.

Material prices continued to increase at a rapid rate. While the index dipped below 60, it was the first time it did so since April. In the last four months, the index was easily at its highest level since late 2014. Fortunately for finishers, prices received increased for the first time since May. Prices received have increased in five of the last seven months. While the future business expectations did pick up slightly in August, the index remained near its lowest level in the last three years.

One reason the overall index has been weak is that the most important industries for finishers have struggled. Amongst finishers, the automotive index has contracted every month but one since September 2015. Aerospace has contracted three of the last five months. Forming/fabricating (non-automotive) has contracted since June 2015. In August, on the positive side were some of the smaller markets: plastic/rubber products, pumps/valve/plumbing products, off-road/construction machinery, hardware and other manufacturing sectors.

Future capital spending plans for the next 12 months were above average (by nearly 10 percent) for the first time since October 2014. Compared to last year, future spending plans have increased by over 10 percent in six of the last seven months. As a result, the annual rate of change has dramatically decelerated since October 2015. The rate of change in capital spending plans should start growing in the next month or two, which would be a positive sign for capital equipment spending in the finishing industry.  

 


Originally published in the October 2016 issue.