Finishers Report Slowing Decline in Business Conditions for First Time Since COVID-19
Index signals decelerating contraction as all components report improved readings.
The Finishing Index reading improved by more than 9 points in May to register 39.8 after setting an all-time low in April. For the first time since the government curtailed normal business operations to prevent the spread of COVID-19, all components of the index moved towards more ‘normal’ levels. This turnaround was led by new orders and production, which rose by 20 and 17 points respectively. Excluding supplier deliveries, all components moved higher from their prior month readings although each remained below a reading of 50. The change in the direction of the readings is indicative of a slowing contraction, meaning that while conditions deteriorated further in the latest month, they did so at a much slower rate compared to the prior month.
The supplier delivery reading fell for a second consecutive month, indicating a potential turning point in the unprecedented disruption that affected upstream production and slowed deliveries earlier in the year. By the nature of how this question is asked, quickening supplier deliveries lower the index’s reading. Despite the recent and significant contraction in new orders, prices for upstream materials continue to increase. Making the situation more challenging is the quickening contraction in prices received for finished goods, which surpassed the prior all-time low set in 2015. This combination of results implies growing pressure on profit margins for the industry.
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.
The Finishing Index indicated that the industry experienced a slowing contraction in May. All components of the index registered improved readings, with supplier deliveries signaling a slowing rate of disruption from COVID-19.
Survey Indicates Profit Compression as Material Prices Increase, Finished Goods Prices Contract
Despite the recent and sharp contraction in new orders according to survey respondents, finishers continue to report rising material prices while also weakening pricing power for their own goods. This combination of forces implies that profit margins are being compressed.