Finishing Index Reports Slowing Contraction
Contracting new orders and backlog activity suppress overall Index reading; impact of COVID-19 expected to have an adverse effect on the Finishing Index in the coming months.
Finishers reported their third month of slowing activity in February as the Finishing Index ended February at 49.0. A reading of 50 would indicate no change in month-to-month activity, while values above 50 indicate expanding business activity. Gardner Intelligence’s review of the underlying index components observed that the Index was supported by a strong expansion in supplier delivery activity followed by production and employment. Conversely, the Index was restrained by sharply slowing backlog activity. Contracting new orders and exports activity also weighed on the Index’s February performance.
Manufacturing Outlook as a Result of COVID-19:
The impact of COVID-19, widely known as the “Coronavirus,” is expected to have an adverse effect on the Finishing Index in the coming months. The efforts of Asian governments in January and February — and by a widening collection of nations in February and March — to combat the spread of COVID-19, while necessary, is also having a detrimental impact on the world’s supply chain, as workers, companies and cities are affected by quarantine measures. This will most immediately restrict the normal flow of upstream and subcomponent goods, which are necessary for the proper functioning of the manufacturing sector.
The Finishing Index is unique in its ability to meticulously measure business conditions specific to the finishing industry on a monthly basis. This means that, moving forward, this Index will be able to quantify both the initial shock from the virus along with the timing and strength of the finishing industry’s eventual recovery. At this time, it is particularly important for our readers to complete the GBI survey sent to them each month.
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Finishing Business Index
The Finishing Index contracted for an eighth consecutive month in February as backlog and new orders activity contracted, while finishers reported slowing growth in production activity.
COVID-19 Expected to Impair Supplier Chains, Export Demand and Increase Costs
Gardner Intelligence expects that most — if not all — of its indicators will be subjected to shocks from COVID-19. That the virus originated in Asia suggests that finishers in the immediate future should pay particular attention to their supply chains and expect increased volatility in export orders and material prices.