Activity Contracts on Weak Orders and Contracting Backlogs

The Precision Machining Index registered 46.1 in October, indicating a slowing contraction in business activity. Readings above 50 indicate expanding activity, and values below 50 indicate contracting activity. The further away a reading is from 50 the bigger the change in activity. Gardner Intelligence’s analysis of the underlying index components found that supplier deliveries activity rebounded in October after posting its first and only contractionary reading in over three years during the prior month. The October data indicated that both new orders and exports experienced a quickening contraction in activity with both setting multi-year lows. The impact of weak orders coupled with almost unchanged production levels likely explains October’s weak backlog reading, which also fell to a three-year low.

The latest month’s weak total and domestic orders may have been in part a result of the strike at General Motors that lasted from Sept. 16 until Oct. 25. During the two months affected by the strike, every component of the Index contracted except for supplier deliveries in October. Beyond the unique challenge to the auto sector in recent months, Gardner’s Precision Machining Index has revealed that several end markets continue to expand. Markets that are still expanding consistently include medical and aerospace manufacturing. Pump manufacturing also continues to expand but with more volatility.