Gardner Business Index: June 2017 — 55.0

Finishing Business Index holds near its five-year high.

Registering 55.0 for June 2017, the Gardner Finishing Business Index was essentially unchanged from May. During the first-half of 2017, the index averaged 54.6, beating the average of 54.5 set during the last industry peak from March through October of 2014. In the current month, the index was supported by strength in new orders, supplier deliveries and production, while pulled down by exports and backlogs.

In the first half of 2017, the indices for production and new orders recorded values that were reminiscent of the highs in 2014, albeit with greater monthly volatility. Supplier deliveries, however, pushed to new highs in the year-to-date period that exceeded even 2014 readings.

Conversely, the indices for exports and backlogs indicated decreasing export activity and backlogs during the first half of 2017 and June, specifically. While hovering just a few points below 50—an indication of no change in an index—both exports and backlogs recorded monthly results in the first six-months of the year that were significantly better than those recorded in the prior 18-month period.

The spread between the material prices and prices received indices narrowed only slightly in June. Both indices contracted with material prices contracting more relative to prices received. The trend in these indices in recent months suggests that a correction has yet to start in the finishing industry, while for other industries monitored by Gardner, this convergence has already begun. 

An examination of prior years’ data reveals that there have, at times, been long periods where the index for material prices is higher than for prices received. Over a three-year period between 2012 and 2014, the gap between prices received and material prices averaged 84 basis points before the indices closed that gap. By comparison, the gap that started in early 2016 has grown steadily, and averaged more than 135 basis points in the first half of 2017. If the gap is to close as it did in late 2014, we would expect to see material prices hold constant while prices received continue to mildly increase.  

 


Originally published in the August 2017 issue. 

 

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