December 2014 Metalworking Business Index (MBI) at 52.1

With a reading of 52.1, the Gardner Business Index showed that the metalworking industry grew for the 12th consecutive month and the 14th time in 15 months. December’s rate of expansion was the fastest since August, and the rate of expansion accelerated slightly throughout the fourth quarter of 2014. The month-over-month rate of growth was 4.4 percent, which was faster than the previous two months. The annual rate of growth decelerated for the third month in a row.

Both new orders and production increased for the 15th month in a row. The new orders index was noticeably higher than last month and hit its highest level since August. The production index was virtually unchanged from last month. Backlogs continued to contract but at a noticeably slower rate than the last three months. Compared to the same month one year ago, backlogs increased 6.6 percent. They had contracted the previous two months. While it was still growing quickly, the annual rate of growth has decelerated for four months in a row. This indicates that capacity utilization will likely see its peak rate of growth in the first or second quarter of 2015. Employment continued to expand, but it did so at its slowest rate of 2014. The rate of contraction in exports continued to slow. Supplier deliveries continued to lengthen, increasing at their fastest rate since August.

Material prices increased at a sharply slower rate. The material price index was under 60 for the first time since December 2013 and at its lowest level since October 2012. Prices received have increased the last eight months. The rate of increase was the fastest since August. This is the strongest period of sustained price increases by metalworking facilities since the summer of 2012. Future business expectations increased slightly, reaching their highest level since May.

Plants with more than 100 employees grew at a somewhat faster rate than last month. These plants still have significantly better business conditions than smaller facilities. However, plants with 50-99 employees continued to grow at a decent rate. Shops with 20-49 employees grew for the second time in three months. And, in a positive sign for the industry, shops with fewer than 20 employees grew for the first time since January 2014 and just the second time since March 2012.

The South Central had been the fastest growing region for five months in a row, but it contracted hard in December thanks to the steep fall in oil prices. It was the only region to contract this month. The fastest growing region was the North Central – East. It was followed by the Northeast, Southeast, West, and North Central – West.

Future capital spending plans contracted 13.9 percent compared to December 2013. This was the fastest month-over-month contraction since April 2013. The annual rate of growth contracted 1.9 percent, which was the first time it contracted since October 2013.