Index Contracts on Weak Backlogs and Exports

The Finishing Index trended lower in November, registering 45.7. Index readings above 50 indicate expanding activity, while values below 50 indicate contracting activity. The further away a reading is from 50 the greater the magnitude of change. According to November’s data, firms with fewer than 100 employees in size reported experiencing more challenging business conditions than their larger peers. Gardner Intelligence’s review of the latest data found that the Index was supported by expanding supplier deliveries and contractionary readings of employment and new orders activity. The Index (calculated as an average of its components) was pulled lower by contracting exports, production and backlog activity.

In recent months, Gardner’s finishing data reported a combination of expanding total new orders and contracting export activity. This combination implied encouraging domestic new orders activity. November’s reading, in which both exports and new orders activity contracted, suggests an end to this trend. Furthermore, the month’s sharp contraction in production activity (resulting in a 3-year low reading) did little to help backlog activity, which remained little changed from October and is also at a 3-year low.

Finishing Index:

The Finishing Index fell to 45.7 in November, its lowest reading since 3Q2016. Contracting production and backlog activity had the greatest impact on the Index’s monthly decline.

 

 

Contracting Production Fails to Slow Backlog Declines:

November’s sharp contraction in production activity did not prevent a further erosion in backlogs. New orders, production and backlogs readings all touched 3-year lows in November.