Industry Growth Resumes After 2 Months

The trend in backlogs indicates significant increases in capacity utilization and capital equipment consumption this year.

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With a reading of 50.9, the Gardner Business Index showed that the production machining industry grew for the first time since September. Compared with December 2013, the index grew 2.0 percent, which was much better than the negligible month-over-month growth in November. The annual rate of change continued to grow at a strong rate but it decelerated for the third month in a row.

New orders expanded after contracting the previous 2 months. Production expanded every month last year, but the rate of growth was the slowest the last 2 months of the year. Backlogs continued to contract, but the index was at its highest level since August. Annually, the rate of change in backlogs has been decelerating for 3 months, but the rate of growth is still quite strong. Therefore, the trend in backlogs indicates significant increases in capacity utilization and capital equipment consumption this year. But, capacity utilization should see its peak rate of growth in the first or second quarter of this year. Like production, employment increased every month last year, but its slowest growth was in December. The contraction in exports slowed significantly in December. The exports index was at its highest level since March, which was the last time exports grew. Supplier deliveries lengthened at a noticeably faster rate in December.

While material prices were increasing at a significantly accelerating rate earlier this year, the last 5 months have seen a lower rate of increase. December was the slowest rate of increase in material prices since August 2013. Prices received were unchanged in December after 2 months of very modest decreases. Future business expectations continued to improve in December. They were at their highest level since June.

Shops with 50-99 employees expanded at the fastest rate in December. They have been growing at a significant rate since October 2013. All other facilities saw significantly better business conditions in December. Facilities with 100-249 employees expanded after contracting the previous 2 months. Also, shops with 20-49 employees grew for the second time in 3 months. Shops with fewer than 20 employees continued to contract, but their rate of contraction was the slowest since May.

The North Central – East saw massive expansion in December, growing at its fastest rate since June and its second fastest rate since March 2012. The West and Northeast also expanded in December. The North Central – West contracted for the third month in a row.

Future capital spending plans for the next 12 months contracted 1.3 percent compared with December 2013. This was the first month-over-month contraction since August. The annual rate of change continued to grow, but the growth has been slower each of the previous 2 months.  

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