Metalworking Index Signals Slowing Expansion in November 2020

The Gardner Business Index (GBI): Metalworking registered its first consecutive pair of expansionary readings since June of 2019 thanks to October and November readings of 52.9 and 50.2, respectively. The Index’s slowing expansion reading in November came largely as a result of falling production and new orders. Despite their declines, both measures remained above 50 during November, indicating that a slightly greater proportion of survey respondents reported improving business conditions than those who reported contracting conditions. Readings for employment, backlogs and exports all fell further below 50, signaling a quickening contraction in these areas of business activity.

Although the GBI’s history would suggest that the burst of production activity during September and October was largely thanks to expanding new orders activity, the sustained elevation of supplier delivery readings suggests that production growth is being even more stymied by disrupted supply chains. Rising supplier delivery readings indicate lengthening order-to-delivery times by metalworking shops for production inputs. November’s supplier delivery readings, which exceeded 60, extends what is now a 5-month trend of rising supplier delivery readings. Should new orders activity rebound again in the coming months while supply chains are overwhelmed by seasonal orders and now vaccine distribution, it begs the question: how will production be able to keep pace with orders?

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