Moldmaking Index Contracts on Weak Supplier Deliveries, Solid New Orders
Expanding new orders and production were offset by downside surprise in supplier deliveries and on-going weakness in exports and backlogs for the Moldmaking Index in October.
The Gardner Business Index (GBI): Moldmaking reported another month of modest contraction, registering 48.3. Index readings above 50 indicate expanding activity while values below 50 indicate contracting activity. The further away a reading is from 50 the greater the magnitude of change in business activity. October’s results were led by a strong expansionary reading in new orders followed by a modest expansion in production. For the first time since at least 2011, supplier deliveries were the worse performing component of the index, falling over 8-points in October. Other components which weighed on the Index during the month included exports, backlogs and employment.
October was notable for its strongly diverging readings of new orders and exports. An increase in total new orders coupled with a simultaneous contraction in export orders implies that domestic orders expanded greatly during the month. Furthermore, October’s strongly contractionary supplier delivery reading -the lowest since at least late 2011- was not unexpected given that backlogs have contracted during the last five months, total new orders have contracted in two of the last three months and production readings have averaged just slightly over 50 in the same period. Upstream suppliers may want to be particularly observant of downstream demand changes in the near-term.