July GBI Led by Supplier Deliveries

For the third consecutive month, supplier deliveries is the fastest-growing component of the overall index.

The Gardner Business Index (GBI) signaled slowing growth through July, as the index fell to a reading of 55.2. Compared to historical results, the latest reading is only slightly below the average 2017 reading of 55.3, the highest calendar-year average in recorded history. The Index continues to indicate that economic and business conditions in manufacturing are strong, with the Index up 1.3 percent compared to the same month one year ago. Gardner Intelligence’s review of the underlying data for the month indicates that the Index was driven higher primarily due to supplier deliveries and to a much lesser extent by production. The components which lowered the index’s average-based calculation included new orders, employment, backlog, and exports. No components contracted during the month.

For a third consecutive month, supplier deliveries are the fastest-growing component of the total index. Furthermore, there have been six times in the current calendar year when supplier deliveries beat its last all-time high of 59.3 set in early 2012. This month’s reading provided further evidence of a maturing business upcycle, as new orders and production growth have recently given way to supplier deliveries and employment. As supply chains have responded to the growing flow of new orders over the last 18 months, the manufacturing industry is now more capable of handling greater volumes of production. However, if future new orders are insufficient to sustain this enlarged production system, manufacturers will eventually have to right size their operations.

Gardner was surprised to see a sharp fall in the employment reading after posting record high readings earlier in 2018. The latest reading is the lowest on record in the last 15-months. In the current business environment, generally lower employment readings are more likely the result of manufacturers’ inability to hire new laborers in such a tight labor market and not an indication of weakening demand for labor. At present both civilian unemployment and manufacturing unemployment are at their lowest levels in recent U.S. history.

The fastest growing industries during the month were oil & gas, power generation, aerospace, electronics/computers/telecommunications, construction machinery, medical, plastics/rubber products, custom processors, automotive, machinery/equipment, primary metals, furniture, metalcutting job shops, forming/fabricating (non-auto), industrial motors/hydraulic/mechanical components, and pumps/valves/plumbing products. All other industries tracked by Gardner Intelligence contracted during the month.

In addition to the overall durable goods index, Gardner Intelligence computes indices for several technologies or processes. For the month, Composites, was the fastest growing technology. It was followed by Plastics, Metalworking, Moldmaking, Finishing, and Precision Machining. All technologies expanded during the month.

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