Finishing Index: July 2016—43.6

With a reading of 43.6, the Gardner Business Index showed that the finishing industry contracted for the 13th consecutive month. In July, the index fell to its lowest level since October 2015 and second lowest level since November 2012.

Future capital spending plans remained below average, but increased compared with one year ago for the seventh time in nine months. Therefore, the annual rate of change was contracting at a significantly slower rate, the slowest since December 2014. This was a sign that the industry was entering its next capital equipment expansion.

New orders contracted for the 13th month in a row. The rate of contraction in new orders accelerated rapidly in June and July. The production index contracted for the eighth month in a row. It was just 0.3 away from its lowest level since November 2012. While it remained in contraction, the backlog index had improved from October 2015 to June 2016. However, the backlog index plunged in July. Employment contracted after two months of growth. While the export index contracted at a faster rate than last month, the overall trend of the index since last October was still up. Supplier deliveries lengthened for the fifth month in a row and at their fastest rate since November 2015. 

The material prices index has skyrocketed since January. In July, material prices increased at their fastest rate in two years. Prices received decreased for the second month in a row after increasing for consecutive months. The rate of decrease was a little slower in July than in June. The future business expectations index declined for the fourth month in a row as expectations fell to their lowest level since December 2012.

Plants with more than 250 employees contracted for the third time in four months. July’s index was the lowest since the survey began in December 2011. Facilities with 100-249 employees contracted for the fifth time in six months. Companies with 50-99 employees contracted for the second month in a row. Finishers with 20-49 employees contracted for the third time in four months. Finishers with fewer than 20 employees remained mired in contraction with just one month of growth since March 2015.

Every region contracted in July. The North Central-East was the best performing region with an index just below 50. Not too far behind was the Northeast, which contracted for the second time in three months. The West and North Central-West had indexes just above 40. The Southeast contracted after six straight months of growth. In July, its index fell 20 points. The South Central had an index below 30 for the second straight month.