Supply Chain and Employment Activity Sustain Index

Registering 58.6 for May, the Gardner Business Index (GBI): Metalworking indicated slowing growth compared to the prior month. The index reading calculated among only metalcutting job shops was also down slightly from April’s reading. Compared to the same month one year ago, the Metalworking Index grew by 2.6 percent. This relatively small increase is due in part to April 2017’s reading being the second highest during that calendar year. Although the latest reading marks the third consecutive month of slowing growth in metalworking, it represents one of the highest readings in the Metalworking Index’s recorded history. Gardner Intelligence’s review of the underlying data for May indicates that strong expansion in supplier deliveries, production and employment drove the index higher. Readings for new orders, backlog and exports lowered the index’s average-based calculation. The new orders reading was nearly the average of the components and had only a minimal impact on the index’s calculation for the month. Excluding exports, all components of the Metalworking Index expanded during the month.

The two components of the index with the fastest growth were supplier deliveries and employment. Gardner Intelligence considers these components to be lagging components after new orders and production. When the rate of new orders increases, manufacturers can make immediate but limited changes to increase production. However, to sustain increased production levels or achieve significantly higher production levels, manufacturers typically must alter supply delivery schedules or volumes and potentially increase employment levels. These efforts typically happen months after the initial change in new orders.