Production Machining Index Remains Unchanged from May

Precision Machining Business Index: The Precision Machining Index was unchanged from May to June as the Index held at 38.4.

The Gardner Business Index (GBI): Precision Machining was unchanged in June, maintaining its prior reading of 38.4. Survey respondents reported slowing contraction in new orders, production and export activity. An increasing proportion of respondents indicated that supplier deliveries quickened, sending that measure down more than eight points, along with putting downward pressure on the overall index. Employment and backlog activity readings fell in June, signaling that a growing proportion of respondents reduced hiring and/or experienced contracting backlogs.

Index registers higher new orders and production readings and quickening supplier deliveries. Despite no change in the overall Precision Machining Index reading for June, new orders and production reported slowing declines and supplier delivery readings quickened. All of these changes should be considered welcome news for the industry.

Slowing supplier deliveries result in an elevated reading. The reason for this has to do with the knowledge that during a period of strong economic growth upstream suppliers experience lengthening backlogs which cause delays to the timely delivery of their products to production machinists. To correlate the slowing of deliveries with a growing economy, this index component rises as supplier deliveries slow and falls with faster supplier deliveries. The recent decline in the supplier deliveries reading in recent months is encouraging information as it implies that upstream manufacturers are finding ways to move product more efficiently than just a few months ago. It also suggests that overall conditions improved in June, despite no change in the overall Index’s value.