Moldmaking Index Falls Sharply
The Moldmaking Index fell sharply in May. The month’s results were surprising as survey participants reported strong new orders while simultaneously reporting contracting backlogs.
The Gardner Business Index (GBI): Moldmaking fell in May to 51.1, indicating only a modest expansion in activity as compared to recent months. Index readings above 50 indicate expanding business activity, while a value of 50 indicates no change, and a reading below 50 indicates contracting business activity. Compared to the same month one-year ago, the Index is 12.9% lower. Gardner Intelligence’s review of the underlying data for the month reveals that new orders followed by supplier deliveries and production lifted the Index -a calculated average of the components- higher. In contrast, exports, employment and backlogs pulled the Index lower. All components which lowered the Index contracted during May with the backlog reading falling to a nearly 3-year low.
May’s results presented an unusual combination of events. Respondents indicated that new orders expanded strongly helped in part by an improvement in export activity. Simultaneously the reading for production activity fell to the lower-end of its 12-month range. This combination of strong activity in orders and slower production would normally imply an increase in backlogs; however, this was not to be the case as backlogs contracted steeply. Between at least 2011 and early 2018, production and backlogs often trended together, not until the second-half of 2018 did this relationship weaken as production activity increased while backlog activity slowed to the point of contracting. One potential explanation for both moving lower despite strong orders could be the resumption of their former relationship; only additional months of data will prove this theory.
Growth in backlogs are the primary driver of the Moldmaking Index, at 60.3 for February.
The Moldmaking Index signals decelerating contraction as all components report improved readings.
Strong expansion in production and quickening supplier deliveries hint at a rebound.