Gardner Business Index: Metalworking March 2016 – 49.7

With a reading of 49.7 in March, the Gardner Business Index showed that the metalworking industry, even though it has continued to contract, has improved significantly since December. The index reached its highest level since March 2015, which was the last time the industry expanded.

The new orders subindex has improved sharply for two months, increasing in March for the first time since the previous March. Production also increased for the first time since last June. Because the new orders subindex has been improving faster than the production subindex, the backlog subindex has improved for four months as well. And while the backlog subindex continued to contract, it made a big jump in February and March. Based on the trend in backlogs, capacity utilization should bottom out in the next six months or so.

Employment contracted for the eighth straight month, although this subindex has improved since August. The export subindex contracted at its slowest rate since March 2015. Supplier deliveries lengthened for the first time since October, indicating increased activity throughout the supply chain.

Material prices increased for the first time since August, although the rate of increase was still the slowest in nearly six years. Prices received have decreased since June, but the rate of decrease has been relatively constant for five months. Future business expectations improved significantly in March, reaching their highest level since last April.

While they are still well below the historical average, future capital spending plans increased to their highest level since last March as well. Compared with one year earlier, planned spending was down just 1.2 percent in March, the slowest rate of contraction since September 2014. This trend indicates that capital spending could begin improving later this year.

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