Supplier Deliveries Sets Record High, Growth Continues

The Gardner Business Index continues to indicate that economic and business conditions in manufacturing are better than average.

The Gardner Business Index (GBI) moved lower in May, issuing a reading of 58.2.  Compared to the same month one year ago, the GBI is up 3.9 percent, indicating that economic and business conditions in manufacturing continue to be better than average.  Gardner Intelligence’s review of the underlying data for the month indicates that the Index was driven higher by supplier deliveries, production, employment, and new orders.  The components which lowered the index’s average-based calculation included backlog, and exports.  All index components expanded during the month, as the exports reading moved above 50.0 – with 50 indicating no change – after contracting (reading below 50.0) in April.

While supplier deliveries repeated its record-setting high from April, both it and employment are considered lagging measures relative to new orders and production.  As the new orders measure drives changes in production, changes in production drive later changes in supplier deliveries and employment.  After new orders and production experienced exceptional rates of growth during the first quarter of 2018, the index is now experiencing new highs in supplier deliveries and employment, consistent with Gardner Intelligence economic theories on the manufacturing business cycle.

Backlogs continue to grow at elevated levels; however, the growth rate recorded during the second quarter is down somewhat from the climax reached during the first quarter.  The growth or decline in backlogs acts as a gauge of the ability of manufacturers to produce at a level consistent with new orders.  As of the end of May, surveyed manufacturers were still reporting growing backlogs, suggesting that the manufacturing sector has at least several quarters of growth still to be realized.  At the end of May, the backlog component reported its 13th consecutive month of expansion; a feat not previously accomplished since the beginning of records.

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

Reports

World Machine Tool Survey

An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.

Gardner Business Index

A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.

Capital Spending Survey

An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more that are then projected across the metalworking industry based on plant size.