Text Box: With a reading of 52.5, the MBI signaled that the pace of growth in the metalworking industry slowed considerably in February. Four of the sub-indices were significant contributors to the slowing growth. New orders and production both showed solid growth in February, but the rate of growth was much slower than January. Also, employment continued to show some growth, but the growth was fairly mild. However, backlogs contracted for the first time since September 2009. The fall in backlogs was extremely sharp and although the fall is not unprecedented the trend is similar to the fall in backlogs in the fall of 2008. Given the over capacity in manufacturing it will be hard for metalworkers to maintain significant backlogs. Over capacity is putting pressure on the prices received by metalworking facilities too. This problem is compounded by the rapid growth in the material prices sub-index since July 2009. Two of the sub-indices (exports and supplier deliveries) remained virtually unchanged. The export sub-index has indicated contraction in all but a couple of months since December 2008. I expect this to continue as most countries attempt to devalue their currency to boost exports (it’s hard to devalue your currency more than others when you are the world’s reserve currency) and the Euro continues to face significant headwinds from debt levels in Greece, Spain, Portugal, and Ireland. Even though the MBI showed slowing growth, future business expectations are still near the all-time highs. However, the trend seems to indicate that future business expectations are beginning to deteriorate. Even as confidence about the future starts to wane respondents to the survey indicated that their plants will spend more on metalworking equipment in the next 12 months.
Sub-Indices February January Percentage Point Change   Direction Rate of Change Trend (Months)
New Orders 61.1 76.3 -15.2   Growing Slower 7
Production 55.6 78.9 -23.4   Growing Slower 7
Employment 52.8 60.6 -7.8   Growing Slower 6
Backlog 47.3 68.5 -21.2   Contracting From Growing 1
Exports 45.8 44.8 1.1   Contracting Slower 4
Supplier Deliveries 52.8 52.6 0.1   Lengthening More 2
Material Prices 72.2 57.9 14.3   Increasing More 3
Prices Received 47.2 50.0 -2.8   Decreasing From Flat 1
Future Business Expectations 75.0 78.9 -4.0   Improving Less 9
               
Overall MBI 52.5 63.6 -11.1   Growing Faster 7
 
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