Published 3/8/2021

Metalworking Activity Starts off 2021 Sending Mixed Signals

Despite the passing of the holiday shipping rush, deliveries times lengthen further, impairing production and raising backlogs.

Economics

Michael Guckes

Former Chief Economist & Director of Analytics, Gardner Intelligence

The Gardner Business Index (GBI): Metalworking changed only slightly during January from where it ended in 2020 as the Metalworking Index moved only a fraction of a point lower to 53.5.

Metalworking Business Index: The Metalworking Business Index closed only slightly lower at the end of the first month of 2021. New orders activity continued to expand but the ability to complete these orders remained challenging as evidenced by rising backlog readings.

Five of the index’s six components registered expansionary readings with export activity remaining stubbornly in contractionary territory. Supplier delivery activity fell only 1/10^th of a point from its all-time high set just one month ago. New orders and production activity further propelled the Metalworking Index higher with each measure marking its fifth consecutive month of expanding activity. Employment activity reported slowing expansion in the latest month while backlog activity rose to a 2-year high.

Supply Chain Impairment and Accelerating New Orders Cause Backlog Build-up: Despite the passing of the holiday shipping rush, delivery times lengthen further, impairing production and raising backlogs.

The combination of expanding total new orders and contracting export orders in recent months testifies to the enduring turnaround being reported in the data since 3Q 2020. In particular, the growth of total orders coupled with a simultaneous contraction in export orders bears witness to the strength of domestic demand for metal manufactured goods. The supply side of this picture is less sanguine as January’s supplier delivery reading had been predicted to decline as logistics operators put fourth quarter holiday shipping demand in the rearview mirror. If current trends continue, it will be a near certainty that manufacturers will have to address the problem of quickly expanding backlogs.