GBI: Finishing for February 2016—46.3

With a finishing index reading of 46.3, the new orders index has improved substantially since October.

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With a reading of 46.3, the Gardner Business Index showed that the finishing industry contracted at the same rate as in January. With the exception of October 2015, the finishing index has been in a relatively narrow range since July 2015, indicating that the industry has contracted at a consistent rate.

New orders contracted for the eighth month in a row. While the index fell slightly in February, the new orders index has improved substantially since October. The production index contracted for the third month in a row. Generally, the new orders index has been stronger than the production for several months. Therefore, while the backlog index has continued to contract, it has contracted at a noticeably slower rate the previous four months. The overall trend still indicated a decline in capacity utilization for the finishing industry, but if the backlog index continues to improve, this could change soon. Employment contracted slightly for the fourth time in five months and the employment index was at its lowest level since the survey began in December 2011. While exports continued to contract, the rate of contraction slowed significantly in February as the index reached its highest level since February 2015. Supplier deliveries were virtually unchanged for the third month in a row.

Material prices remained the same after decreasing the previous five months, although the material prices index has trended up since November. Prices received increased for the first time since August. Future business expectations declined somewhat from January, falling to virtually the lowest level in the last two years.

Plants with more than 250 employees contracted for the first time since August. The index fell to 36.1 from 50.0. Facilities with 100 to 249 employees contracted for the first time since September, although their contraction was much slower than the largest facilities. Companies with 50 to 99 employees contracted for the seventh time in nine months. Finishers with 20 to 49 employees grew for the first time since July. Finishers with fewer than 20 employees continued to contract, but had their highest index since June 2015.

The South Central grew at the fastest rate of any region in February. This was the first time its index was above since April 2015. The only other region to grow was the Southeast, which has grown three of the previous four months. The North Central-East, which was just under 50 in February, has contracted for five months, followed by the Northeast, North Central-West and West regions.

February’s future capital spending plans were the second highest in the previous six months. Compared with one year ago, spending plans were up 15.0 percent, which is an increase compared with one year ago in three of the previous four months. The annual rate of change has contracted at a decelerating rate for the previous four months. All of this indicates that future capital spending is trending up.

 

Originally published in the April 2016 issue.

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