Precision Machining Index Signals Slowing Expansion
Supplier deliveries reading keeps index above ‘50.’
The Precision Machining Index reported a slight expansion in overall business activity during November as production and new orders activity levels both signaled slowing expansion. The index would have fallen another two points without the inflationary influence cause by sluggish supply chains.
The Gardner Business Index: Precision Machining Index closed November at 50.4, extending its recent trend of mild activity expansion. (See October Index.) Lengthening order-to-fulfillment times further elevated the reading for supplier deliveries. Excluding the inflationary impact of the supplier deliveries’ reading on November’s overall index result would have sent the Production Machining Index to its lowest reading since COVID-19 first affected machinists in early 2020. November reported a slowing expansion of production and new orders activity. The level of export and backlog activity also contracted at a quickened pace.
The combination of COVID-19 restrictions, seasonal shopping and vaccine distribution will place an unprecedent burden on logistics systems during the fourth quarter of 2020 and beyond. How severely these factors will slow manufacturing production activity is unknown but cannot be overstated.
The reading for supplier deliveries rose to its highest level since April. As reported in prior reports, the reading for supplier deliveries rises when order-to-fulfillment periods lengthen. The combination of COVID-19 supply chain disruptions, the seasonal rise in fourth quarter shipping demand and now the start of vaccine distributions across the globe will all further strain logistics channels, which can be expected to both further elevate the supplier deliveries reading but also hinder the desired level of production activity pace.
About the Author
Michael Guckes is chief economist at Gardner Intelligence, the research and market intelligence division of Gardner Business Media. He provides forecasting, modeling and consulting services to clients and provides content for all Gardner brands. For more information about Gardner’s Business Index, visit gardnerintelligence.com.