July MBI at 55.1 – Growth Remains Strong

With a reading of 55.1, the MBI showed that the metalworking industry continues to grow at a strong rate. Since August 2009, the average reading for the MBI is 58.1. The MBI chart shows that since August 2009, the growth rate has remained fairly close to that average, too.

There were two primary reasons for the slightly slower rate of growth in July. First, production saw a 31.6-percentage-point drop in July. A drop has occurred every July since the MBI started, but the magnitude of this drop was more than other years. Also, this was the first time production contracted since August 2009. The second reason for the slower rate of growth was employment. The employment index fell by 22.8 percentage points, but it still showed overall growth in employment levels.

While the drop in production was significant, new orders remained at a strong rate of growth, which boosted the growth rate of backlogs to its highest level since November 2010. Also, supplier deliveries continue to lengthen—a trend that has been ongoing since February 2010. I think it is a sign of the overall strength in manufacturing at the moment. With that said, 2011 future business expectations have been fairly muted compared to 2010, but a significant spike in this subindex in July showed its second highest reading ever.