Business Index Retains Gains of Prior Month

Registering 56.1 for September, the Gardner Business Index (GBI): Precision Machining largely sustained the expansionary turnaround reported for August. Compared with the same month one year ago, the index increased by 0.5 percent. Since hitting a surprise low point in July, the Index has rebounded largely on the strength of supplier deliveries, production and new orders. For the latest month, Gardner Intelligence’s review of the underlying data indicate that the Index was supported by supplier deliveries—which has been the fastest expanding component for seven consecutive months—followed by production and new orders. The index’s average-based calculation was weakened by employment, backlog and exports. Only exports reported a contracting reading during the month.

Exports recorded its lowest reading in over a year as it fell almost three points, putting this component in contracting territory. Earlier in the year, exports moved above and below a reading of 50, which is the defining line between expansion and contraction. Export’s low reading for the month may have been in part caused by Chinese tariffs of between 5 percent to 10 percent on U.S. goods starting on Sept. 24.  Despite the impact that tariffs may have on exports in coming months, the recent history of strong expansion in new orders and backlogs supports the belief that U.S. manufacturing may be able to withstand the volatility from changes to international trade.

Gardner continues to be encouraged by the substantial expansion of supplier deliveries, new orders and production as they are considered significant leading indicators of the future health of manufacturing.  Low unemployment and over 20 months of generally above-average backlog growth give Gardner Intelligence reason to remain optimistic for the future.