Business Conditions are Improving

Production grew for the second month in a row, and employment expanded for the first time since May.


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With a reading of 48.5, Gardner’s precision machining index showed that business conditions contracted at faster rate in November compared with October. However, compared with the same month 1 year ago, the index has grown at a double digit rate each of the last 2 months. In November, the index was 14.9 percent higher than it was in November 2012.

After growing in October, new orders contracted slightly in November. However, production grew for the second month in a row. Backlogs continued to contract, but the backlog index was above 40 for the second month in a row after falling below 40 the previous 5 months. Employment expanded for the first time since May. Exports continued to contract as the dollar remains relatively strong. Supplier deliveries lengthened for the fourth straight month.

Material prices increased at a faster rate for the third straight month. For the most part, prices received have been increasing, but they have done so at a very modest rate. Future business expectations have improved each of the last 2 months, reaching their highest level since April 2012.

Facilities with 20-249 employees saw improving business conditions in November. However, conditions at the smallest and largest facilities deteriorated significantly this month. Plants with more than 250 employees have been growing off and on during the year. But, plants with fewer than 20 employees have been contracting since April 2012.

The West North Central region grew at the fastest rate in November. And, it grew for the second straight month. The Pacific region was the only other one to grow in November.

Planned capital expenditures were at their average level since the index began in December 2011. However, compared with last November, planned capital expenditures were 64.6 percent higher. The annual rate of change in planned capital expenditures also increased in November.