GBI: Finishing for January 2016—46.4

New orders index continues to improve.

With a reading of 46.4, the Gardner Business Index showed that the finishing industry contracted in January for the seventh month in a row. However, the index has generally trended up since October, which indicates that the industry has begun to contract at a slower rate.

New orders contracted for the seventh month in a row. In the previous three months, the index has improved dramatically. The production index contracted for the second month in a row. While the backlog index continued to contract, it has contracted at a significantly slower rate the previous three months. The overall trend still indicates a decline in capacity utilization for the finishing industry, though if the backlog index continues to improve, this could change soon. Employment contracted slightly for the third time in four months. Exports have tumbled due to strengthening of the dollar since December 2014. Supplier deliveries were unchanged for the second month in a row.

Material prices decreased for the fifth month in a row. While the rate of decrease was unchanged from December, the overall trend in this index has been significantly low since May 2015, correlating with falling commodity prices because of a weaker global economy. Prices received decreased for the fifth month in a row, but the rate of decrease decelerated noticeably from the previous two months. Future business expectations have trended up since last October.

Plants with more than 250 employees were flat in January, and the pace of expansion has slowed the previous two months. Facilities with 100–249 employees expanded at a robust rate for the fourth month in a row, while companies with 50–99 employees fell back into contraction after expanding the previous month. Finishers with 20–49 employees had their highest index since September, although they still contracted in January. Finishers with fewer than 20 employees continued to contract, but had their highest index since last June.

The Southeast was the only region to expand in January, having grown two of the previous three months. The other regions, from slowest to fastest contraction, were the North Central-East, West, North Central-West, Northeast and South Central.

Future capital spending plans remained relatively weak in January. They were still almost 33 percent of the historic average, however, they were 14.1 percent higher than they were one year earlier. That was the second time in three months that the one-month rate of change increased.

Originally published in the March 2016 issue.

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