April Index at 48.2; Growth Streak Ends at Three Months

With a reading of 48.2, the Gardner Business Index showed that the finishing industry contracted at its fastest rate since August 2013. Generally, the index has been trending down since its peak in June 2014. Compared with one year ago, the index contracted 10.1 percent, which was the fastest rate of contraction since May 2013. Also, this was the second month in a row that the index contracted compared with one year ago.

New orders were flat in April after four solid months of growth. Production expanded slightly and has not contracted since December 2013. Backlogs continued to contract. The index reached its lowest level since August 2013. The backlog index in April was 21.0 percent lower than it was one year ago. The trend in backlogs indicated that capacity utilization likely recorded its peak rate of growth a month or two ago. Employment has increased at a consistently strong rate the last three months. Exports continued to contract due to the relatively strong dollar, but the rate of contraction slowed somewhat in April. Supplier deliveries were unchanged this month after shortening last month. These were the only two months that supplier deliveries had not lengthened since the index began in December 2011.

Material prices increased in April after being flat in March. However, the material prices index was still at its second lowest level ever. Prices received increased after decreasing the previous two months. For the most part, prices received have increased since December 2013. Future business expectations fell somewhat in April but were still above the average level of the last year.

Plants with more than 250 employees expanded at a strong rate in April. But, shops with 20-49 employees were the fast growing segment. This was the second month in a row of growth for these plants. Companies with 50-99 employees contracted for the first time since December 2014. Shops with 1-19 employees have seen business fall off sharply the last two months. In April, these companies contracted at their fastest rate since August 2013.

Future capital spending plans have been hit hard the last six months. Compared with one year ago, the minimum rate of contraction has been 27.0 percent in that six month period. On an annual basis, spending plans have contracted for five straight months and the current rate of contraction was 15.4 percent.

Future capital spending plans have taken a hard hit the last five months. The month-over-month rate of change has contracted more than 27 percent in each of those months. And, the month-over-month rate of change has contracted in seven of the last nine months. The annual rate of change has contracted at an accelerating rate for four straight months.