Precision Machining Extends Upward Advance Moving into New Year
Rising new orders by constrained production lifts backlog reading to 18-month high
Precision Machining Business Index: The new year saw the Index continue along the path of accelerating expansion. The expansion of total new orders activity has played an essential role in the expansion of the index during the last six months.
The Gardner Business Intelligence: Precision Machining Index extended its expansionary trend thanks to January’s 53.3 reading, which was driven higher by the readings for supplier deliveries, new orders and employment. Of key importance, new orders activity reported its third consecutive month of accelerating expansion. (See January Index Report.) Collectively, survey respondents also reported that employment expanded at a level last experienced in mid-2019. Production activity growth slowed slightly, continuing its latest trend of slowing growth, which — when combined with new orders activity — sent the backlog reading to its highest level in over 18 months. This is despite the export activity contracting to its lowest level since COVID-19’s initial shock to the industry.
Domestic Orders Powering Total New Orders Growth: The economic recovery from the disruptions caused by COVID-19 have been globally disparate. Measured by GDP, relatively few developed countries have rebounded from COVID-19 better than the U.S. This is copacetic with the widening spread between total New Orders and Export orders data in Gardner’s survey results.
The last data suggests a continuation of the challenges which beset production machining at the end of 2020. According to Gardner’s survey data from precision machining shops across America, order-to-delivery performance is worse now than at any time since early 2018, including during the early months of the COVID-19 pandemic. This unprecedented challenge has had a clear impact on production activity, which is struggling to respond to five consecutive months of accelerating new orders activity and sent backlog activity to recent era highs. The data seems to indicate that the success of precision machinists in 2021 will be a function of their ability to improve production and supply chain practices so as to benefit from the ongoing rebound in market demand.