Metalworking Business Index for September: 44.1

With a reading of 44.1, Gardner’s Metalworking Business Index showed that the industry contracted in September for the sixth month in a row, although it did improve compared with August. New orders also contracted for the sixth month in a row, but the rate of contraction was noticeably slower than the month before. Production contracted at an accelerating rate for the third month in a row, but the production index remains above the new orders index. The backlog index, therefore, contracted once again. Since March 2014, this backlog index has followed a fairly steady downward trend, indicating falling capacity utilization at metalworking facilities. While employment contracted for the second consecutive month, the rate of contraction was noticeably slower in September than it was in August. The dollar continues to increase in value relative to almost every other currency, therefore the export index contracted for the 18th month in a row. Supplier deliveries shortened for the first time since June 2013, and shorter delivery times indicate that suppliers aren’t as busy and can more easily meet the demands of customers.

Virtually all commodities have fallen in price throughout 2015. As a result, the material prices index showed that material prices decreased in September for the first time since June 2009. This index has fallen consistently since June 2014, while prices received have remained relatively stable this year. The combination of falling material prices and stable prices received should boost profitability at metalworking facilities some. The future business expectations index continued to fall in September and was at its lowest level since November 2012.

Future capital spending plans were basically unchanged from August, however, compared with one year earlier, they fell 26 percent. That’s the sixth month in a row that metalworking facilities have cut capital spending plans by more than 20 percent.