9/18/2019 | 1 MINUTE READ

PMI Trends Lower on Weak Backlogs, Employment

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The August PMI indicates that both foreign and domestic new orders contracted in August, but at a lesser rate than in July. Should these readings continue to close in on the 50 mark in the coming months, it will indicate a stabilization in the demand for production machined goods.

The Precision Machining Index fell modestly from the prior month, registering 46.5 for August. Readings above 50 indicate expanding activity and values below 50 indicate contracting activity. The further away a reading is from 50 the greater the size of the change in activity. Gardner Intelligence’s review of the underlying components of the Index found that both exports and total new orders registered higher readings during the month despite both measures posting readings below 50. This indicates that both foreign and domestic new orders contracted in August, but at a lesser rate than in July. Should these readings continue to close in on the 50 mark in the coming months, it will indicate a stabilization in the demand for production machined goods. For the month, production activity registered as “unchanged,” while supplier deliveries posted another month of slowing activity growth. Conversely, employment moved 10 points lower from the prior month, registering its lowest reading since the first half of 2016.

Weakness in both domestic and foreign demand resulted in many Production Machining survey participants relying on their backlogs to keep their shops active. This caused reported backlog activity to contract at its fastest rate in almost three years. August marked the third consecutive month of contracting backlogs.

 

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