October Sees Moderate Contraction, but Growing New Orders

Despite another month of weak exports reading, October’s recorded expansion in new orders implies that domestic orders continue to expand and power U.S. industrial growth.

The Gardner Business Index (GBI) ended October at 48.3, signaling a fourth month of mildly contracting business activity across the U.S. manufacturing sector. Index readings above 50 indicate expanding activity while values below 50 indicate contracting activity. The further away a reading is from 50, the greater the magnitude of activity change. 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 expanding activity in supplier deliveries, new orders and employment.  As in recent months, production continued to register very closely around the 50 mark.  Weighing on the Index were backlogs and exports. Both experienced quickening contraction, and both measures set new multi-year lows in October.

Based on a three-month moving average, the best performing end-market as of October was aerospace, an industry which has been consistently and strongly expanding since 2016.  It was followed by medical equipment manufacturing which has seen its business activity levels expand significantly during the third-quarter of 2019.  Conversely, the market for construction machinery continued to experience the fastest rate of contracting business activity among the 24 end markets Gardner monitors.  This decline has been mirrored by a similarly enduring contraction in the industrial motors market.

The decline in export activity has affected manufacturers of all sizes.  At the peak of the current business cycle in early 2018, large firms over 100 employees in size experienced some of their greatest export activity gains since Gardner began tracking export data in 2011.  Since the time of America’s pivot in international trade strategy in 2018, these larger firms have experienced a strong contraction in export activity.  However, total new orders – which predominately consist of domestic orders – continue to do well.  The implied result is that firms of most sizes at present are experiencing expanding activity in domestic new orders.

For the month, Metalworking, Moldmaking and Composites all tied as the best performing technology; they were followed by Finishing, Plastics Technology and Production Machining. To learn more about the detailed trends occurring in the manufacturing sector visit Gardner’s Business Index website at: https://www.gardnerintelligence.com/report/snapshot, readers can also visit our website blog and social media accounts to read about the latest news in the manufacturing sector.

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