Metalworking Index Cools with Slowing Growth in New Orders and Production Activity
Slowing growth in production and employment activity elevated backlogs, but weighed down overall metalworking activity.
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View MoreGardner Business Intelligence’s Metalworking Index fell one point in August from the prior month to close at 60.0.
Metalworking Index: The Metalworking Index declined in absolute terms for a second sequential month during August. This is the first time the Index has done so since COVID first shocked the industry in March of 2020.
The decline was caused in part by a second consecutive month of slowing expansion for both production and employment activity. The reading for supplier deliveries — which proxies for the timeliness of order-to-fulfillments — declined by more than a negligible amount for the first time since late 2020. The 2.5-point decline indicates that a slightly smaller proportion of manufacturers experienced worsening delivery times in August as compared to July.
Decades-Long New Orders and Production Relationship Inverts: 2021 new orders readings have exceeded those of production, breaking a longstanding equilibrium. This change has resulted in expanding backlogs activity and rising manufacturer price negotiating power.
New orders activity was unchanged from the prior month, indicating similar levels of expanding activity in July and August. Throughout 2021, new order readings have exceeded those of production. This represents an inversion of a decades-long relationship in which production readings have nearly always been modestly above those of new orders. The consequences of this inversion for shops have thus far included quickly expanding backlogs and strengthening pricing power. It will be important for shops to take advantage of these industry changes wherever possible in order to mitigate rising production costs and to protect margins.
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