Business Index Retains Elevated Status in March
The Precision Machining Index completes its best quarterly performance in history.
The Precision Machining Index reading of 59.5 for March capped off the best quarterly performance of the index since its inception. The index has been propelled higher since the fourth quarter of 2016 by production and new orders readings.
Data for the first quarter of 2018 indicate that supplier deliveries are growing at record rates and well above their historical average. Despite significant increases in supplier deliveries, backlog levels throughout the quarter continued to climb higher.
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Registering 59.5 for March, the Gardner Business Index (GBI): Precision Machining notched up its best quarterly performance in recorded history. Compared with the same month one year ago, the index increased by slightly under 2 percent; however, this is largely because of a spike reading from March 2017. Comparing first-quarter performance with the prior year, the Precision Machining Index (PMI) is more than 5 percent. Gardner Intelligence’s review of the underlying data indicates that supplier deliveries, production, new orders and backlog all lifted the business index higher. The components, which lowered the index’s average-based calculation, included employment and exports. Exports contracted (registered a reading below 50) for the first time since November 2017.
The latest month’s components readings indicate that aggressive increases in supplier deliveries starting at the beginning of the year have played a pertinent role in improving production rates and tackling surging new orders. Looking at the last 18 months of data, it is apparent that supplier deliveries were caught off guard when new orders jumped during the fourth quarter of 2016. Throughout 2017, new orders continued to pressure job shops to increase production, and they did. However, suppliers needed several months to adapt to the upward shift in demand for manufactured goods.
The latest data still point to elevated backlog levels that shops will need to work off this year. While backlogs grew throughout 2017, in part because of strong new orders demand, data from the first quarter of 2018 indicate that backlogs have grown at an even faster rate in 2018, than during any quarter of 2017. In general, these data support Gardner Intelligence’s positive manufacturing outlook for 2018.
