Activity Broadly Rebounds at Start of 2021
Appears in Print as: 'Activity Broadly Rebounds at Start of 2021'
Index Activity Broadly Improves After Weak 2020 Closing
The Gardner Business Index (GBI): Finishing leaped higher to 56.0 in January after closing out the month of December with a disappointing contractionary reading. New orders, production and employment activity all reported expanding activity. Although the change in production closely followed the expansion in new orders, this did not keep backlogs from expanding for the first time since September. The growth in backlogs may have been triggered by the lengthening order-to-fulfillment times as reported by survey respondents. Finishing’s January supplier delivery reading at 69.6 was the highest among all manufacturing disciplines and is 4-points above its prior all-time peak of 65.5.
The historical correlation (a quantitative way to measure the associated movement of two series) between both new orders and production to backlogs is nearly 90%. Yet it would be premature to conclude that these factors alone drive backlog activity. Between 2011 and 2019 the correlation rate between backlogs and supplier deliveries was a non-trivial 66%. This may serve as a reason to believe that elevated backlog activity will remain a concern until supply chain disruptions are resolved.
Finishing activity rebounded strongly during the first month of 2021, thanks to a broad-based expansion in several critical business activities.
CONNECTION BETWEEN SUPPLIER DELIVERIES AND BACKLOGS CANNOT BE FORGOTTEN
The impact of supplier deliveries activity on backlogs has rarely been felt more sharply than in the current COVID environment.
The Finishing Index is unique in its ability to measure business conditions specific to the finishing industry on a monthly basis. The challenges facing finishers today require leaders to have good data in order to make effective forward-looking decisions. It is thus particularly important at this time for our readers to complete the Index survey sent to them each month. Your participation will enable the best and most accurate reporting of the true impact that COVID-19 is having on the finishing industry along with the industry’s eventual recovery.