January MBI at 60.2 – Faster Growth Continues

With a reading of 60.2, the MBI showed that the metalworking industry continued its trend of steadily accelerating growth since February 2010. The two contributors to the faster growth in the MBI were production and employment. Both components saw significantly faster growth despite two consecutive months of slower growth in new orders. The dramatic increase in production, combined with the slower growth in new orders, led to a significant slow down in the rate of growth in backlogs. A significant issue that every index like the MBI is showing is margin compression. The rate of growth in material prices has gone almost vertical while the prices that the metalworking industry receives has grown, but nearly as fast. Because of the Federal Reserve’s policy of money printing, the prices of commodities have skyrocketed. This will put significant pressure on profitability in future months. While they are still quite good, future business expectations have dropped to their lowest level since July 2009. Finally, planned capital expenditures remain well above the levels of October 2008 through April 2010, but they have leveled off since November 2010. For more on the MBI go here.