July Finishing Activity Reports Quickening Deceleration

The Products Finishing Index moved lower in July ending at 60.9. The latest reading marks the third time in four months that the Index has fallen since setting an all-time high. July’s overall reading was supported by elevated readings for supplier deliveries and backlogs. New orders, production employment and export activity all kept the Index from moving higher; however, no component of the Index fell below ‘50’, which serves as the separator between expanding and contracting activity. 

The latest new orders and production readings both extended their slowing expansion trends from prior months. Both measures are presently 10-points or more below their all-time highs established in the first quarter of the year.  Despite July’s decline in new orders and production activity readings, backlog activity readings remain near an all-time high. This unusual combination of slowing production growth coupled with strongly expanding backlog activity may signal that supply chain constraints are preventing production from pacing with even the slowing growth of new orders.

Products Finishing Index

The Products Finishing Index trended slightly lower for a fourth month; however, the Index remains only 3-points below its March all-time high.

Backlogs Continue to Outpace Production

The inversion of the historic relationship between backlog and production activity in recent months is unprecedented. The relatively faster decline in production activity may signal just how distressed finishers are for inputs.