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Business Index Growth Slows on New Orders and Backlogs

Dynamics between new orders, supplier delivery and production see backlogs contract.

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Registering 53.5 for November, the Gardner Business Index (GBI): Precision Machining Index moved lower as new orders grew relatively slower as compared with supplier deliveries and production. Compared with the same month one year ago, the index decreased by 1.4 percent. Supplier deliveries continue to be the fastest expanding component among all index components since the end of the first quarter of 2018. In addition to supplier deliveries, Gardner Intelligence’s review of all underlying components reveals that production followed by new orders strengthened the average-based index result for the month. In contrast, employment, backlog and exports brought the Index lower. In an unexpected move, exports reported its strongest expansion in a single month since May.

As was witnessed previously in July and repeated in November’s data, strong supplier deliveries and an expansion in production that was relatively stronger than that in new orders growth weakened backlogs, which fell by more than six points. This fall resulted in a contractionary backlog reading comparable with results not seen since late 2016. While recent readings for backlogs have waivered between mild expansion and contraction during the third and fourth quarters of the year, a significant part of this may be a result of the growth and expansion of production and supply chains in recent years.  As the production and supply chain pipelines have grown during this time it would be natural for backlogs to eventually contract. When compared with historical results, both new orders and exports continue to post above-average results, which lend support to the durability of the current market expansion and health of the manufacturing industry.