Employment and Supplier Deliveries Lead PMI

The Precision Machining Index (PMI) ended 32 consecutive months of expanding activity readings with a July reading of 47.1. Readings above 50 indicate expanding activity and values below 50 indicate contracting activity. The further away a reading is from 50, the greater the size of the change in activity. Compared with the same month one year ago, the Index is 9.7% lower as a result of four of the Index’s six components registering contracting values. Gardner Intelligence’s review of the underlying components of the Index revealed that activity in supplier deliveries and employment remained above 50. However, these components tend to lag the more responsive components, which include new orders, exports and production. The Index—the simple average of its six components—was pulled marginally lower as new orders and production joined exports and backlogs in contracting during the month.

A surprise contraction in both new orders and production contributed to an extensive contraction in backlog activity. All three components contracted at levels not seen since the third quarter of 2016. The last time that the PMI registered simultaneous contractionary values for these same four components was June 2015. It was not until August and September of the same year that employment and supplier deliveries respectively also contracted.