August GBI: 55.0

Data from the Gardner Business Index (GBI) for August increased from the prior month to 55.0, bringing the index closer to its year-to-date index average to 55.3.  Gardner Intelligence’s review of the data indicate that supplier deliveries, new orders, and production lifted the business index higher while employment, backlog and exports pulled the index lower.  The only component that contracted for the month was exports.  In the year-to-date and one-year ago periods, the GBI is up 8.7 percent and 12.2 percent respectively.

New orders, production, and backlog:  New orders and production index values have moved in a highly-correlated manner through the calendar year.  After jumping from around 50 -indicating no change- during the fourth quarter of 2016 to over 60 -indicating strong growth- during the first quarter of 2017, these sub-index components have moderated since, recording values of between 63 and 56 during the second and third quarters of 2017. These above-50 values indicate that growth in production and new orders has been holding steady according to Gardner Intelligence’s broadest measure of manufacturing activity.

Similar to new orders and production, the sub-index measuring backlog also increased during the first quarter of 2017, albeit with a slight lag compared to production and new orders.  The backlog sub-index during the second and third quarters of 2017 has averaged slightly above 52, representing continual growth in backlogs, but at a slightly lower rate than the growth in production and new orders.

The GBI team closely monitors the backlog reading as it is considered a bellwether to capacity utilization and ultimately machine tool sales.  The August backlog reading was slightly down from one-month ago but is up considerably from the beginning of the year.

Exports: The Export reading retreated slightly in the prior month.  For the year-to-date period, the export sub-index has averaged 48.4, representing a slight contracting of exports.  During the same time the value of the dollar as measured by the Federal Reserve’s Real Trade Weighted US Dollar Index against Major Currencies has fallen by over 8 percent since the beginning of 2017.  This comes after the dollar appreciated sharply during the fourth quarter of 2016 as the U.S. threatened to revise long-standing trade agreements.  If the dollar continues to weaken against other major currencies Gardner Intelligence would expect some improvement in exports although this would also make imports of machine tools to the U.S. more expensive.

The fastest growing industries were  industrial motors/hydraulic/mechanical components, primary metals, machinery/equipment, hardware, custom processors, electronics/computers/telecommunications, aerospace, metalcutting job shops, automotive, plastics/rubber products and petrol processors.  All other industries contracted.

In addition to the overall durable goods index, we compute indices for several technologies or processes. In August, Additive Manufacturing was the fastest growing technology. It was followed by Composites, Automotive, Moldmaking, Metalworking, Production Machining, Plastics Technology and Products Finishing.