Finishing Index Starts Year With Quickening Expansion

The Finishing Index logged additional acceleration at the start of 2019 with a 51.8 reading, marking a slight improvement over December’s reading. The Index has fallen 9.0 percent compared to the reading from one year ago. At the start of 2018, the Index was accelerating toward what would become an all-time high reading in March. Since then, the Index has indicated slowing growth within the industry, which is not to be mistaken for an industry contraction. The latest reading was supported by a strong expansion in production, new orders and employment. The components which pulled the index lower—calculated as an average of the components—included supplier deliveries, backlogs and exports. Backlogs and exports both contracted in January.

January marks the first time since May of 2018 that the supplier delivery reading was not the leading (fastest growing) component of the Finishing Index. During the early months of 2018, new orders and production both registered multiyear highs before registering slower growth during the remaining months of the year. The slower growth of supplier deliveries at the start of 2019 may indicate that the finishing industry’s supply chain is approaching a new equilibrium with demand for finished goods and services.

This potentially new equilibrium, however, may be disrupted by the ongoing trade negotiations with several of America’s largest trading partners. Exports contracted sharply during the second half of 2018, leaving domestic demand to fill the gap. Recent months of contracting backlog readings suggest that the recent months of domestic demand are not completely replacing lost export demand.