Manufacturing Extends Record-Setting Expansion

Supply chains are being careful in their rebalancing of to current demand levels after facing a surge of new orders in 2018.

Registering 53.4, the Gardner Business Index (GBI) moved marginally lower from the prior month. The latest result indicates that manufacturing continues to expand, albeit it at a lower rate than experienced earlier in the latest business cycle. February marks the 25th consecutive month of expansion in the manufacturing industry according to Gardner’s survey. By comparison, the prior expansionary cycle in 2014 and 2015 lasted only 15 months. Compared to the same month one year ago, the Index is down 11.8 percent, but it is important to remember that February 2018 set an all-time record high reading over 60.0. Gardner Intelligence’s review of the underlying data for the month observed that the Index -calculated as an average of its components- was supported by production, supplier deliveries, new orders and employment. The components which lowered the Index included backlog and exports. Exports was the only component to contract.

February’s data provides additional support to past observations. The first of these is the continuing gradual rebalancing of supplier deliveries with production. Over the last six months, production has expanded at a relatively stable rate while supplier deliveries have experienced slowing growth since surging in mid-2018. This suggests that upstream suppliers are taking a careful approach to rebalancing supplies with current demand.

The data also provide further evidence for Gardner’s other observation in recent months: domestic demand has been supplanting weakening exports. The latest data extends the on-going trend of expanding total new orders despite a persistent, yet mild contraction in exports since July of 2018. The strength of domestic demand is evidenced by the expansionary backlog readings recorded in the latest two months of data.

The fastest growing industries during the month were primary metals, power generation, pumps/valves/plumbing products, plastics/rubber products, aerospace, custom processors, industrial motors/hydraulic/mechanical components, construction machinery, automotive, forming/fabricating (non-auto), hardware, petrol processors, metalcutting job shops, machinery/equipment and oil & gas. 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 Production Machining, Metalworking, Plastics, Moldmaking, and Finishing. All technologies expanded during the month.

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