Business Conditions Flatten

With a reading of 49.9, Gardner’s precision machining index showed that business conditions in the industry flattened. This was the highest level for the index since February. The index was 12.4 percent higher than it was in October 2012. This was the first time since the index began that the month-over-month rate of change was positive.

New orders improved substantially, growing for the first time since March. Production improved by a similar amount, growing for the first time since May. Backlogs have contracted at a very significant rate since June 2012. But, in October, backlogs were virtually unchanged. The backlog index was the highest it has been since March 2012.

Employment continues to contract at a moderate rate. Exports have contracted since the index began in December 2011 as the dollar remains relatively strong. Supplier deliveries lengthened at an increasing rate for the third straight month. 

Material prices increased at a faster rate for the second straight month. For the second time in 4 months, prices received contracted slightly. The improvement across a number of the sub-indices has pushed future business expectations up significantly. The expectations sub-index reached its highest level since April 2012. 

Facilities with 50 or more employees saw significant growth in October after generally contracting the previous 4 months. The smallest shops, those with fewer than 19 employees, saw their contraction stop in October as the index was virtually unchanged. October was the highest index for these small shops since February.

While every region had contracted the last 2 months, in October three regions—South Atlantic, New England, and West North Central—grew at a significant rate. While the Pacific, East North Central, and West South Central regions continued to contract, they did so at a slower rate. The Middle Atlantic contracted at a faster rate for the second straight month.

Planned capital expenditures were at their lowest level since November 2012. They were 22.9 percent below the level of October 2012. This was the third month in a row that the 1-month rate of change contracted.