Economic News Blog
Posted by: Steven Kline, Jr. 7. November 2012

October MBI at 46.5 – Rate of Contraction Flattens

 With a reading of 46.5, the Metalworking Business Index showed that the metalworking industry has contracted for the fourth month in a row. However, the rate of contraction was unchanged compared to the rate of contraction in September. While the official rate of contraction remained unchanged, based on the graphs of the overall index and the sub-indices it appears that there has been a slight change in the trend in the industry. Growth had been decelerating at a consistent rate for most of 2012 but the rate of contraction has not been accelerating as fast as the rate of growth was decelerating. This is a subtle shift, but could indicate the beginning of a bottom to this low point of the cycle. I’m writing this on election day so the result of the election hasn’t been factored into the results of the survey yet. But, I think we will see improvement in the index once the election is over regardless of who wins.

New orders contracted for the fourth month in a row, but the rate of contraction was slower than in September. Production contracted for the third time in the last four months and the rate of contraction was faster in October than in September. Employment contracted for this first time since April 2011. Backlogs continue to contract at a significant rate as new orders have been contracting more than production. Supplier deliveries are still lengthening but the index is the lowest has been since August 2011. This indicates that the slowdown is fairly widespread throughout manufacturing. While material prices are still increasing, albeit more slowly, prices received by shops have contracted for the second month in a row. Perhaps the brightest part of the survey was that the future business expectations index improved in October. While this sub-index is still near its low since mid 2009 it does appear to be bottoming out. During the last two upturns in metalworking, the future business expectations have rebounded before most of the other sub-indices.


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