Index Gains 3 Points to Register First Expansionary Reading Since COVID-19
Production and new orders activity bolster Index to best reading since 2019.
Precision Machining Business Index: The Precision Machining Index advanced only three points in August. However, this marked the first time since 2019 that precision machinists reported an expansion in new orders. New orders activity is a bellwether for many of the Index’s other components.
The Gardner Business Index (GBI): Precision Machining crossed above the ‘50’ line to register 51.4 for August, marking the Index’s first expansionary reading since 2019. (Readings above a level of ‘50’ signal expanding business activity and are generally associated with a growing economy. See last month’s Index here.) The improvement in the index was broad-based as all components reported improving conditions. However, production and new orders led the move higher with both reporting their first expansionary readings since before the COVID-19 crisis. A small decline in the supplier delivery reading indicated a modest improvement in supply chain operations.
Supplier Delivery Activity Readings Approaching Long-Run Average: Disruptions to supply chains in 2020 slowed the delivery of goods to manufacturers and, consequentially, elevated supplier delivery readings. As suppliers have adapted to COVID-19’s disruptions, monthly deliveries activity readings have moved toward their historical average.
Dissimilar to the textbook example of a recession, COVID-19’s economic impact on manufacturing has been unique because of its shock to both demand and supply. While in a classic recession there is a reduction in the demand for goods which lowers sales, COVID-19 has further reduced sales because even when there is willing demand for a product, disruptions in the supply chain mean there may not be product to sell. Whether lost sales are due to a shift in demand or a lack of available supply, the impact to the economy is the same. As supplier delivery readings continue to normalize and new orders readings continue to move higher, it appears that the industry is taking the right and necessary steps for a successful recovery.