PMBI Shows Fourth Straight Contraction

With a reading of 44.8, Gardner’s precision machining index showed that business activity contracted faster in June. This is the fourth straight contraction, and each month the rate of contraction has accelerated. 

There continues to be a significant gap in performance between large and small shops. In previous months, shops with more than 50 employees were growing. But in June, only shops with more than 100 employees grew. Facilities with 50-99 employees contracted for the first time since December 2012. The smallest shops, those with fewer than 19 employees, contracted at the second fastest rate since April 2012. 

New orders contracted for the third straight month. After four straight months of growth, production contracted as well in June. With the relatively stronger performance of production versus new orders, backlogs contracted at their fastest rate in 2013. There are many indications that the industry is suffering from some excess capacity at the moment. Employment contracted for the first time in 2013. Exports continue to contract as the dollar continues to get stronger relative to other currencies. Supplier deliveries shortened for the first time since December 2011. This is yet another sign of excess capacity in the market.

Material prices grew at a slightly faster rate in June, while prices received continued to grow at the same rate, which has a slight negative impact on profits. Despite the recent poor performance in the industry, future business expectations reached their second highest level since June 2012. 

The South Atlantic region grew for the second straight month. The rate of growth increased significantly in June compared with May. The West North Central region contracted in June after relatively strong performance in April and May. The Pacific region contracted for the third straight month, while the East North Central region contracted for the fourth straight month. The Middle Atlantic region remains the worst performer, hitting its fastest rate of contraction since August 2012.

Planned capital expenditures have fallen for four consecutive months, reaching their lowest level since November 2012.