Gardner Business Index: Nov 2020

The Gardner Business Index moved lower between October and November from 53.9 to 51.0. The decline was largely a result of slowing activity in production and new orders. Large firms categories (100-250 and >250 employees) in recent months have signaled significantly better overall business conditions relative to firms under 20 employees in size.

Manufacturer’s Report Slowing Expansion in November

Following a nearly 2-year high reading in October, the results of the Gardner Business Index for November fell nearly 3-points to 51.0, signaling slowing expansion in the manufacturing sector.  All six of the components which constitute the Index moved lower.  The decline in new orders, production and backlogs activity readings accounted for most of the decline in the overall index and yet despite the sizable fall in these readings, new orders and production still reported expanding activity. Employment activity contracted for the first time since August while backlogs and exports reported worsening activity contractions.

Throughout the history of the GBI, new orders and production have moved very closely together.  Changes in new orders activity are frequently mirrored by production in the same or the following month.  During normal business cycles it is common to associate most of the change in production as a result of the change in new orders.  However, 2020’s pandemic recession means that the on-going disruption to supplier deliveries -and supply chains more generally- is functioning as a likely drag or cap on otherwise normal levels of production activity.  Challenging supplier delivery conditions overall in 2020 have hindered production even when there is willing demand for goods, leading to loss sales and rising prices for a myriad of goods.  Should new orders activity rebound again in the coming months while supply chains are overwhelmed by seasonal orders and now vaccine distribution, it begs the question: how will production be able to keep pace?

The picture for new orders activity which serves as Gardner’s proxy for total demand -like production activity- has been complicated by the pandemic.  Over the last four months, expansionary readings for total new orders have contrasted sharply with consistent contractionary readings for export orders.  This suggests a definite bifurcation in demand by geography with expanding domestic order activity occurring simultaneously with contracting export activity.

Business activity when segmented by company size signaled that small firms bore a disproportionate amount of November’s slowdown.  In contrast, firms between 100-250 and over 250 employees in size signaled a fourth consecutive month of strongly expanding business conditions.  Firms between 100 and 250 employees in size have reported overall activity readings in excess of 58 in each month since August.

Gardner Intelligence does its utmost to provide regular and informative updates on the state of manufacturing considering the challenges posed by COVID-19.  Gardner cannot thank our survey participants enough for their insights and on-going support.  We hope that you will continue to tell us how your businesses are faring.  Only through your participation are we able to assess the current industry and see where it is heading.  We would encourage our followers and publication subscribers to regularly visit our website blog and connect with Gardner Intelligence on LinkedIn and see our YouTube Channel.

Reports

Top Shops

‘Top Shops’ is a benchmarking and recognition program designed to help shops build their business.

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.

Capital Spending Survey

An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more.

Gardner Business Index

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