Supplier Deliveries and Employment Drive High Growth Rate

While the Index indicates slowing growth for a fourth consecutive month, it continues to show manufacturing conditions well above long-term norms.

The Gardner Business Index (GBI) indicated slowing growth for a fourth consecutive month, with a reading of 57.5. Despite the falling readings, the Index continues to indicate that economic and business conditions in manufacturing are well above long-term norms. Compared to the same month one year ago, the Index is up 3.9 percent, driven higher by supplier deliveries, employment, production, and new orders according to  Gardner Intelligence’s review of the underlying data. The components which lowered the Index’s average-based calculation included backlog, and exports. Only exports signaled contraction in June, reading slightly below 50.

For another month, supplier deliveries hovered near its all-time high recorded in April. Based upon the increasing readings for supplier deliveries and employment, in addition to simultaneous falling readings for new orders and production, the data suggests that the upside phase of the business cycle may be maturing. As supply chains and expectations have been adjusting to the changing flow of new orders over the last 18-months, the industry is now more capable of handling greater volumes of production. However, if new orders growth should become insufficient to sustain the enhanced supply chain system, then the cycle will begin moving beyond the upcycle peak.

The short-term view of manufacturing is often well represented by backlog data, which while recording lower numbers in recent months, continues to be above the long-term average. It is important to realize that each end market (automotive, aerospace, medical, electronics, etc.) has its own business cycle timing, for this reason it is important for manufacturers and shops to have a diversified customer base in order to endure the trough of any given end-markets’ own cyclical behavior.

 

The fastest growing industries were industrial motors/hydraulic/mechanical components, pumps/valves/plumbing products, aerospace, construction machinery, primary metals,

oil & gas, electronics/computers/telecommunications, plastics, forming/fabricating (non-auto), petrol processors, machinery/equipment, metalcutting job shops, automotive, custom processors, medical, hardware, and power generation. All industries tracked by Gardner Intelligence reported expansion during the month.

 

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

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