Industry Expansion Continues

The Precision Machining Index registered slowing growth in June with a reading of 50.9. 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 11.3% lower due in primarily to a very strong reading in the prior year. Gardner Intelligence’s review of the underlying components of the Index revealed that activity in supplier deliveries, production and employment supported the Index. The Index—the simple average of its six components—was pulled marginally lower because of slowing growth in new orders. The Index was weighed down heavily by contracting backlog and export, with both registering 30-month lows and exerting most of the downward pressure on index’s latest reading.

The sharp contraction in backlogs was caused at least in part by June’s divergent readings for production and new orders. Production activity during the month was comparable to the strong levels recorded nearer the market cycle peak in early 2018 while new orders activity registered only slightly increased activity. The result of this variance would necessitate that manufacturers depleted their backlog levels in order to allow for June’s strong production reading.