September Index Reflects Slowest Growth This Year

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

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With a reading of 50.9, the Gardner Business Index showed that the production machining industry expanded for the ninth month in a row. The rate of expansion was the slowest so far this year. However, compared with 1 year ago, the index was up 13.6 percent. September was the fifth consecutive month of double-digit, month-over-month growth. The annual rate of change has grown faster each month for 7 months. In September, the industry was growing at a 14.8 percent annual rate.

New orders grew for the tenth month in a row. The rate of growth in new orders has been on a decelerating trend since January. Production expanded for the ninth consecutive month, but at its slowest rate of the year. Backlogs have contracted 2 of the last 3 months. September had the fastest rate of contraction since last November. But backlogs were still 15.7 percent higher than they were 1 year ago. The trend in backlogs indicates significant increases in capacity utilization and capital equipment consumption for next year. Employment continued to grow at a strong rate. The rate of growth has been stable the last 3 months. Exports continued to contract in September. Supplier deliveries continued to lengthen, and they have done so at a fairly consistent rate this year.

While material prices were increasing at an accelerating rate earlier this year, the last 3 months have seen a lower rate of increase. Prices received have increased the last 5 months at the fastest and most sustained rate since the first quarter of 2012. However, the rate of increase has slowed down since June. Future business expectations have stabilized after falling rather sharply in July and August. 

Shops with 20-49 employees were the most significant reason for the slower growth in the overall index. These shops had been expanding at a strong rate since December 2012. But in September, their index fell to 44.1 from 55.1. That was the fastest rate of contraction at these facilities since December 2012. Facilities with more than 50 employees continued to expand at a very strong rate, while shops with one to 19 employees have contracted at a relatively constant rate the last 4 months. Four of the five regions expanded in September. The Southeast was the fastest growing region for the second month in a row. It was closely followed by the West region. Also growing, but at a noticeably slower rate, were the North Central – East and North Central – West regions. The Northeast region contracted for the first time since April.

Future capital spending plans for the next 12 months reached their highest level in September since February last year. Compared with 1 year ago, future spending plans increased 33.9 percent. The annual rate of change grew for the first time in 3 months, and the rate of growth was the fastest since last December.