Industry Returns to Growth

January finishing index was at its highest level since March 2014.

With a reading of 52.36, the January Gardner Business Index showed that the finishing industry expanded after contracting the previous two months. The index virtually was at its highest level since May 2014. Compared with one year ago, the index increased by 0.8 percent in January. The annual rate of growth slowed to 6.3 percent. This was the fourth month in a row that the annual rate of growth decelerated.

New orders expanded for the third time in four months. The index was at its highest level since March 2014, and production increased sharply in January from a flat December. Production is expanding at its fastest pace since May. The backlog index continued to contract, but the rate of contraction was the slowest since June. After contracting in December, the month-over-month grew in January. The trend in backlogs indicates that capacity utilization should continue to expand into the second quarter of 2015, and capital spending should increase throughout the year as a result. Employment increased after contracting in December. Exports contracted once again due to the relative strength of the dollar. Supplier deliveries continued to lengthen at a slower and slower rate. 

The rate of increase in material prices has decreased dramatically since October. In January, they were increasing at their slowest rate since August 2012. Prices received continued to increase at a healthy rate, however and have been generally increasing since December 2013. Future business expectations dropped from their significant December spike.

Facilities with more than 250 employees continued to grow, but they did so at a slower rate in January. Plants with 50-99 employees and with 100-249 employees saw dramatic improvement in their index. Both were growing at very strong rates. Finishers with 20-49 employees contracted for the third straight month. But, finishers with fewer than 20 employees expanded for the first time since August 2012.

The North Central – East expanded at by far the fastest rate of any region in January. In fact, it expanded at its fastest rate since March 2012. The Southeast and North Central – West grew at more moderate rates. The Northeast was flat after contracting the prior three months. The West contracted for the second month in a row.

Future capital spending plans fell to their lowest level since the index began in December 2011. Compared with one year ago, future spending plans decreased 46.6 percent. That marked three straight months of more than a 28 percent decline month-over-month. The annual rate of change has contracted at an accelerating rate the last two months.