May Index Reflects Fastest Growth since January

With a reading of 55.5, the Gardner Business Index showed that the production machining industry grew for the fifth month in a row in May. The rate of growth reached its highest level since January. Compared with last May, the index was 16.4 percent higher. This is the eighth month in a row that the month-over-month rate of change has increased. The annual rate of change has grown at an accelerating rate the last 4 months.

New orders increased for the sixth straight month, but the rate of growth generally has slowed since January. Production has expanded the last 5 months and on a generally upward trend since last September. Backlogs expanded for the fourth time in 5 months. Compared with 1 year ago, backlogs increased by 37.5 percent this month. Annually, backlogs have increased at a rapidly accelerating rate the last 5 months. This is a positive sign for future capacity utilization levels and capital spending. The rate of hiring has increased dramatically, reaching its fastest rate of growth in the history of the index. After growing in March, exports contracted for the second straight month. Supplier deliveries are lengthening at their second fastest rate since July 2012.

Material prices have increased at a rapidly accelerating rate the last 2 months. They are now increasing at the fastest rate since March 2012. After contracting the previous 2 months, prices received by shops increased in May. In fact, prices received increased at their fastest rate since April 2012. Future business expectations shot up in May, reaching their second highest level in the history of the index.

Better business conditions were record at a number of plant sizes. Facilities with 100-249 employees grew at a significantly faster rate than the previous 3 months, reaching their second fastest rate of growth since the index began. Plants with 50-99 facilities grew at a slightly faster rate than last month. Shops with 19 employees or less grew for just the second time since April 2012.

Every region expanded in May. After 3 months of contraction, the Northeast region grew at the fastest rate in May. It was closely followed by the West region, which has grown for 5 straight months. The North Central – East, Southeast; and North Central – West regions also grew in May.

Compared with 1 year ago, planned capital expenditures contracted for the fourth time in 5 months. However, the annual rate of contraction is decelerating and should continue to do so for at least the next couple of months.