April Index Falls after Strong March

With a reading of 48.1, the Gardner Business Index showed that the production machining industry contracted after a strong March and expanding in 3 of the previous 4 months. In April, the index fell to its lowest level since September 2013. Compared with 1 year ago, the index fell 8.7 percent. April was the fourth straight month of month-over-month contraction. The annual rate of growth decelerated for the seventh consecutive month.

New orders contracted after 2 months of strong growth. The production index dropped sharply, but continued to grow for the 16th month in a row. The backlog index fell to its lowest level since November last year. Compared with 1 year ago, the backlog index has contracted 7 straight months. The annual rate of change indicated that capacity utilization in the industry has seen its peak rate of growth. Employment increased for the third consecutive month. Exports have contracted for 13 months because of the relatively strong dollar. Supplier deliveries were virtually unchanged, lengthening at their slowest rate since July 2013. Supplier deliveries were pointing to general weakness across manufacturing.

Material prices increased at a slightly faster rate in April than in March. However, the rate of increase was still almost the slowest in 2 years. Prices received decreased at their fastest rate since the index began in December 2011. Future business expectations have been trending down since December, but they were still just above their historical average in April.

All plant sizes recorded a decline in their index for April. Growth was still quite strong at plants with more than 50 employees, though. Companies with 20-49 employees grew for the fourth time in 5 months, but the rate of growth was minimal in April. After growing in March, shops with fewer than 20 employees contracted at their fastest rate since August 2013.

The North Central – West was the fastest growing region in April. It grew for the fourth month in a row. The only other region to grow was the North Central – East, which grew for the fifth straight month. Both the Northeast and West regions contracted in April after expanding at a significant rates the previous 2 months. 

Future capital spending plans took another big hit in April, contracting by 46.2 percent compared with 1 year ago. In 3 of the previous 4 months, future spending plans have contracted by more than 25 percent. The annual rate of change has contracted in 2 of the previous 4 months.