Index Grows Again in July

With a reading of 51.6, the Gardner Business Index showed that the production machining industry expanded for the seventh month in a row in July. However, this was the slowest rate of growth in 2014. Compared with 1 year ago, the index was 14.2 percent higher this month. This is the tenth consecutive month the index has been higher than it was 1 year ago. In all but 2 of those months, the index has grown at a double digit rate. As a result, the annual rate of change has been growing at a rapidly accelerating rate. The industry is growing at the rate of 11.3 percent, annually.

New orders grew for the eighth month in July, but the rate of growth fell sharply from June. The new orders index is at its lowest level since November last year. The production index expanded for the ninth time in 10 months. Like the new orders index, the production index fell noticeably from June to its lowest level this year. The backlog index contracted for only the second time since December 2013. However, the backlog index is still significantly higher than it was 1 year ago, which is a positive sign for future capacity utilization and capital equipment investment. Even though the employment index fell from last month’s record high, the index remains near its highest level since the spring of 2012. Exports continue to contract, but the rate of contraction is still virtually the slowest since the survey began in December 2011. Supplier deliveries continue to lengthen at a fairly consistent rate.

Material prices increased at a slower rate than last month, but the rate of increase was still the second fastest since March 2012. And, the accelerating trend in material price increases remains intact. Fortunately, prices received are providing some consolation. The last 3 months have seen prices received increase at their fastest rate since April 2012. Future business expectations have been above average since October 2013. However, expectations fell sharply from the last 2 months.

Facilities with more than 100 employees continue to grow at a strong rate. However, their rate of growth decelerated to its slowest of 2014. Plants with 50-99 employees have seen a consistent rate of growth and are growing almost as fast as the largest facilities. Shops with 20-49 employees have grown since November last year, but they are growing at their slowest rate since that same month. After growing in May, shops with fewer than 19 employees have seen a significantly accelerating contraction in business conditions. 

Only three of the five regions expanded in July. The Northeast grew at the fastest rate, but its growth rate has slowed significantly since May. It was followed by the North Central – West, and the North Central – East. The growth rate in the North Central – East was by far its slowest this year. The West contracted at a marginal rate for the first time this year. And, the Southeast contracted for the second month in a row.