Economic News Blog
Posted by: Steven Kline, Jr. 8. August 2012

July Metalworking Business Index at 48.3

With a reading of 48.3, the Metalworking Business Index showed that the metalworking industry has contracted for the first time in three years. The contraction could be due to seasonal effects since these results are from July, which is when many manufacturing facilities slow down or shut down for maintenance. Also, after three years of growth, one month of contraction compared to the previous month means that the metalworking industry is still operating at very high levels. However, since March 2012 there has been a steady decline in the growth of the metalworking industry. For more information, go here.

Both the new orders and production sub-indices fell significantly in July, moving from growing to contracting. However, during this three-year expansionary period, both of these sub-indices have been at lower levels.

Employment continues to expand although it is growing at a slower rate.

Backlogs are contracting at the fastest rate since this expansion began. And, with new orders contracting faster than production, the industry could see backlogs contract further.

Exports continue to contract as the dollar strengthens against other currencies.

The one bright spot is that supplier deliveries continue to lengthen. This indicates that manufacturing in general is still operating at a fairly lean level, especially with backlogs contracting so sharply.

The future business expectations sub-index has fallen below its historical average, which means that owners/managers are less optimistic than usual.

Certainly, the significant drop in backlogs has contributed to this. Also, the Supreme Court’s decision on healthcare was announced shortly before this survey. A similar reduction in optimism occurred last year during the government’s debt ceiling debate. Business owners and managers are more optimistic when conditions appear more stable.

About the MBI

Since its inception the MBI has been computed from results of shops that specifically signed up to fill out the survey.

The Metalworking Business Index (MBI) is created from a monthly survey sent to manufacturing executives in the durable goods industries. The MBI is a diffusion index based on 50.0; it functions in the same way as the ISM’s PMI. When the MBI is above 50.0, the metalworking industry is expanding; when the MBI is below 50.0 the industry is contracting. The total MBI is a weighted average of the subindices for new orders, production, employees, inventories, exports, and supplier deliveries.

Need more information?
Contact your GBM representative or Steve Kline, Jr.
Director of Market Intelligence
Gardner Business Media, Inc.
800-527-8837 • 513-527-8837
800-950-8020 • 513-527-8800
Fax: 513-527-8801

 

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