Finishing Index Ends 30 Consecutive Months of Expansion

The Finishing Index registered its first contractionary reading since 2016 with a July reading of 47.5. The latest Index reading is over five points lower than the reading from the same month one year ago. Index readings above 50 indicate expanding activity, while values below 50 indicate contracting activity. The further away a reading is from 50, the greater the magnitude of change. The latest Index reading was supported by expanding supplier deliveries. The Index calculated as an average of its components was pulled lower by contracting activity in employment, new orders, exports and backlogs. Employment activity contracted in July for only the second time since the fourth quarter of 2016. The last time employment activity contracted was during November 2018.

July marks the second time in 2019 that new orders have contracted. In the year-to-date period, new orders readings have averaged 52.6, while production activity has averaged 56.4. This spread in new orders and production is one reason for the last nine months of contracting backlogs. July’s contraction in new orders and unchanging production activity further weighed on backlog activity. The last time that backlogs contracted at this rate was during the second half of 2016.