Understanding a Diffusion Index Like the GBI

The Gardner Business Index (GBI) -just like the Purchasing Manager Indices compiled around the world- is calculated as a diffusion index.  A diffusion index is at its core a weighted average meaning that it behaves differently from the majority of charts used in the business world.  Understanding how the results are calculated will help you to both understand what a particular value is indicating along with how to properly compare readings over time.

In our latest series of posts about the Gardner Business Index (GBI), Gardner has compared the previous high readings set in 2018 against those established during the first quarter of 2021.  In particular, the GBI’s supplier delivery reading has rocketed past its prior high of 63.3 to reach an astounding 77.3 as of March 2021.  At a minimum, a critical reader will be thinking “so what?, what does a 14-point spread between historic highs mean in all practicality?” 

In short it means that potentially more than twice as many survey participants in the March 2021 survey may have indicated that they are experiencing slowing supply chains (lengthening order-to-fulfillment times) as during the previous high of 2018 when the manufacturing sector was at the apex of a 2-year expansion of business.  That expansion was also the longest since at least 2011.  The 2018 supplier delivery reading at 63.3 had around 25-30% of all respondents reporting lengthening order-to-fulfillment times.  In contrast, the latest monthly result at 77.3 indicates that somewhere between 50-60% of respondents reported lengthening fulfillment times, more than double the percentage of respondents compared to the former high.  Getting back to the original question, what does this 14-point spread mean?  It means far more than most people realize.  Below is a short video that Gardner Intelligence has produced to help you understand how our results are calculated, what they mean and how you can benefit from them.

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.