Gardner Business Index: Precision Machining, July 2016 - 43.0

Future capital spending plans increased compared with one year ago.

With a reading of 43.0, the Gardner Business Index showed that the precision machining industry contracted for the 16th month in a row in July, but was unchanged compared with the previous month. The index has been virtually flat since April.

New orders contracted for the fourth month in a row. The index rebounded somewhat in July after falling sharply the previous three months. Production contracted for the 14th straight month. Other than the fourth quarter of 2015, the production index was near its lowest level since the fourth quarter of 2012. The backlog index contracted for the 23rd consecutive month. Employment contracted for the 12th month in a row. Exports remained mired in contraction as global trade has slowed. Supplier deliveries lengthened for the sixth time in seven months, but the rate of lengthening has slowed since April. 

The material prices index had increased sharply since December, with prices increasing the previous four months. But in July, the rate of increase in prices slowed. However, during the previous three months, material prices have increased at their fastest rate since the end of 2014. Prices received at precision machine shops decreased for the fifth consecutive month. The index was slightly above its lowest level since the survey began in December 2011. Future business expectations moved lower in July, falling to their lowest level since February.

Facilities with more than 250 employees contracted for the fifth time in six months. Plants with 100-249 employees contracted for the sixth month in a row. Companies with 50-99 employees contracted for the first time since February. Companies with 20-49 employees contracted for the fourth month in a row after a single month of growth in March. Shops with fewer than 20 employees continued to contract, but the rate of contraction slowed somewhat compared with the previous two months. 

For the third month in a row, all six regions contracted. The North Central-West contracted at the slowest rate with an index of 47.6. Its index was almost five points ahead of the next best region. The Southeast, Northeast, and North Central-East contracted at similar rates to each other. Both the West and South Central had an index below 40.

Future capital spending plans for the next 12 months remained well below average. However, they increased compared with one year ago for the second time in four months. This is a somewhat encouraging sign. 

                     
Sub-Indices July June Change Direction Rate Trend
New Orders 40.6 36.9 3.7 Contracting Slower 4
Production 40.9 42.6 -1.7 Contracting Faster 14
Backlog 36.1 35.8 0.3 Contracting Slower 23
Employment 45.1 47.1 -2.0 Contracting Faster 12
Exports 44.2 41.4 2.8 Contracting Slower 28
Supplier Deliveries 51.0 54.2 -3.2 Lengthening Slower 5
Material Prices 57.0 60.5 -3.5 Increasing Less 5
Prices Received 46.5 45.9 0.6 Decreasing Less 5
Future Business Expectations 61.2 63.2 -2.0 Improving Less 56
                     
Precision Machining Business Index 43.0 43.0 0.0 Contracting Flat 16