Published 9/14/2020

Metalworking Index Contraction Slows for Fourth Straight Month

Index components continue to move toward 50, led by production and new orders

Economics

Michael Guckes

Former Chief Economist & Director of Analytics, Gardner Intelligence

Metalworking Business Index: The Metalworking Index continued to make gains in August with improved readings for all measures. The greatest advances during the month came from production and new orders activity.

The Gardner Business Index (GBI): Metalworking ended August at 48.6, signaling a fourth straight month of slowing contraction within the industry. With the exception of supplier deliveries, all components moved higher, led by production and followed by new orders. Activity readings for employment and exports also moved significantly higher, yet they remained below a reading of 50, which signals no change from the prior month. The supplier delivery reading fell slightly in August — during the last three months, the reading has fluctuated within a narrow range of 56 to 58. This is only slightly above the measure’s historical average of 55.4.

Supplier Delivery Activity Only Slightly Above Long-Run Average: The metalworking supply chain has moved in a narrow range since June. The reading for supplier deliveries is only slightly higher currently that its historical average, suggesting that supply chains are making progress in adapting to the post-COVID-19 economy.

COVID-19’s economic impact on manufacturing has defied textbook examples of a recession, and has been unique in its shock to both supply and demand. While in a classic recession, demand for goods is reduced (which lowers sales), COVID-19 has further reduced sales via disruptions in the supply chain. So even when there has been a willing demand for a product, in many cases, there has not been a product to sell. In either case — whether lost sales are due to a shift in demand or a lack of available supply — the impact to the economy is the same. As supplier delivery readings continue to normalize and new orders readings continue to move higher, it appears that the industry is taking the right and necessary steps for a successful recovery.

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