Supply Chain and Employment Now Primary Index Drivers

The Gardner Business Index (GBI): Metalworking indicated slowing growth for a fourth consecutive month with a reading of 57.5 for June. Despite falling readings, the Index continues to indicate that economic and business conditions in manufacturing are well above the historic average of 51.0. Compared to the same month one year ago, the Index is up 2.6 percent, driven higher by supplier deliveries and employment. Readings for new orders, backlog and exports lowered the Index’s average-based calculation. This is the second consecutive month in which new orders weighed down the overall index result. None of the index components contracted (registered below 50.0) during the month. 

Strong expansion in supplier deliveries and employment suggest that the metalworking supply chain continues to grow to handle the robust demand for products experienced over the last 18 to 24 months. This combined with the concurrent slowing of new orders growth since the first quarter of 2018 suggests that we may be experiencing a maturation of the upcycle phase of the business cycle. However, backlogs growth suggests that, at least in the short-run, that the industry is in a very good position. Recent backlog readings are still well above the Index’s long-run average reading.