Gardner Business Index’s Pace of Growth Accelerates

With a reading of 53.4, the Gardner Business Index showed that the production machining industry expanded for the eighth month in a row. The rate of expansion was notably faster than July and was about the average for this year. Compared with 1 year ago, the index was up 19.2 percent. August was the ninth time in 11 months that the index has increased by more than 10 percent compared with 1 year ago. The annual rate of change has grown faster each month for 6 months. In August, the industry was growing at a 13.6 percent annual rate.

New orders grew for the ninth month in a row. The rate of growth in new orders increased sharply, but the overall trend this year has been one of slower growth in new orders. Production expanded for the tenth consecutive month. Throughout the year, the rate of growth in production has been relatively consistent. After contracting last month, backlogs grew at the second fastest rate this year in August. Compared with last August, the backlog index was up 47.5 percent. The trend in backlogs indicates significant increases in capacity utilization and capital equipment consumption in 2015. While employment continued to grow at a strong rate, the rate of growth has decelerated the last 2 months. Exports contracted at their fastest rate since November last year. Supplier deliveries continued to lengthen, and they have done so at a fairly consistent rate this year.

While material prices have increased at a slower rate the last 2 months, the overall trend since August last year has been for material prices to increase at a faster rate. Prices received have increased the last 4 months at the fastest and most sustained rate since the first quarter of 2012. Future business expectations have fallen sharply since June, but were still above this year’s low point.

Facilities with more than 100 employees continue to grow at a strong rate. However, their rate of growth has decelerated rather noticeably the last 2 months. Mid-size shops, those with 20-99 employees, expanded at a significantly faster rate than last month. In fact, the fastest growth in August occurred at shops with 50-99 employees. Shops with 19 employees or less have contracted for 3 months in a row, but the rate of contraction slowed in August.

Four of the five regions expanded in August. After contracting for 2 months, the Southeast grew at the fastest rate in August. It was followed by the North Central – East, North Central – West, and Northeast. The West region was the only one to contract. The contraction in the West region has accelerated the last 2 months.

Future capital spending plans for the next 12 months contracted for the second month in a row, and the rate of contraction accelerated in August. The annual rate of change has contracted at a slightly accelerated rate for 2 months.