Precision Machining Business Index Reading Starts Year in Record Territory
Appears in Print as: 'Reading Starts Year in Record Territory'
Index Opens 2018 with Record High Reading of 61.7
The January reading of the Precision Machining Index at 61.7 set yet another all-time record for the Index. This was driven largely by new orders and production and a surprising jump upward in backlogs.
Recent new orders readings have outpaced production, which has resulted in significant increases in reported backlogs. A portion of this strong demand for new orders is coming from international customers. A weaker dollar over the last year may be encouraging stronger foreign demand for U.S. goods.
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Bringing in the new year with a reading of 61.7, the Gardner Business Index (GBI): Precision Machining started 2018 by recording its fastest-ever rate of expansion. Compared with the same month one year ago, the index increased by almost 10 percent. Gardner Intelligence’s review of the underlying data indicates that new orders, production and backlog lifted the business index higher, while supplier deliveries, employment and exports pulled the index lower. For a second month in a row, no components contracted.
January was notable for its strong new orders reading and a surprise jump in backlog. For a second month in a row, new orders expanded faster than production. Both components have been the primary drivers of the Precision Machining Index since the fourth-quarter of 2016. Reviewing past trends from the Gardner Business Indices reveals that when new orders growth exceeds production growth, it is typical for manufacturers to experience additional growth in future months as manufacturers adjust to increased demand. The outpacing of new orders with production has resulted in significant increases in backlogs as evidenced by January’s backlog reading being the highest in more than five years. Expansionary exports readings in recent months indicate that some portion of the growing demand for manufactured goods is due to growing international demand.
