Index Maintains Third Month of Exceptional Growth
Supplier deliveries led the Precision Machining Index for a second consecutive month.
GBI: Precision Machining: The Precision Machining Index reading of 57.2 for April was down slightly from the previous month. However, the reading represents one of the highest recorded monthly values in the history of the index and is a testament to the longevity of the expansion side of the current market cycle.
Supplier Deliveries Trail Surge in New Orders and Production: Gardner Business Index data over the past three quarters shows the progression of the production machining industry as it moves through the current business cycle. A surge in new orders was followed by production increases, which then resulted in an increase in supplier deliveries to support the increased production level.
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Registering 57.2 for April, the Gardner Business Index (GBI): Precision Machining fell slightly from the prior month’s reading. For reference, the latest reading is higher than the peak reached during the last cyclical high recorded in 2014. Compared with the same month one year ago, the index increased by almost 8 percent. Gardner Intelligence’s review of the underlying data indicates that supplier deliveries and employment lifted the business index higher. The components, which lowered the index’s average-based calculation included production, new orders, backlog and exports. Exports contracted for a second consecutive month.
The latest month’s components readings showed that supplier deliveries led the index for a second consecutive month. The last time such an event occurred was in mid-2016. Gardner Intelligence’s interpretation of the components data is that strong new orders growth during the fourth quarter of 2017 was then followed by a sharp increase in production during the first quarter of 2018. As manufacturers increased production to meet heightened demand they stressed their supply chains, causing Gardner’s supplier delivery readings to peak in the most recent months.
Efforts by manufacturers and their suppliers to accommodate new order demand have been largely successful as the growth in backlogs has slowed for each of the last three months after hitting an all-time high in January. The backlog reading from March to April fell by more than four points, marking the largest single-month decline in backlog growth in 2018. In addition, recent readings of production and new orders indicate that the production machining industry may have just passed—or is currently passing—the most straining period resulting from the burst in new year orders.
