Finishing Industry Holds Gains in July

Registering 52.5 for July, the Gardner Business Index (GBI): Finishing indicated sharply slowing growth during the month. Although the latest reading is six-points lower than June’s, any reading above 50 still indicates expansion over the prior month. No components of the index were higher in July, which would indicate faster expansion, however, the index is coming off an unprecedent growth streak.

Gardner Intelligence’s review of the underlying data for the month reveals that supplier deliveries were the index’s best-performing component. They were unchanged during July, expanding at the same rate as June. However, the remaining five components, which are used in the average-based formula for the overall finishing index, all moved significantly lower. Supplier deliveries and production lifted the index higher, while backlogs and exports both contracted.

New orders growth slowed more quickly than production during July, and this may indicate that finishers used their inventories to sustain current levels of production. Backlog growth since the fourth quarter of 2017 has expanded faster than at any other time in the history of the index, which dates back to 2011. Thus, if the current situation is only temporary, finishers should be adequately able to maintain constant production levels even if new orders experience a temporary slowing.

Employment readings across all of the manufacturing sectors that Gardner tracks have been moving lower in recent months. We believe these lower hiring readings are not indicative of weak demand for labor, but more likely evidence of the difficultly that all manufacturers are having in finding available labor for hire.