Index Experiences Accelerating Contraction

The Finishing Index fell to 46.4 in September, posting a third month of contracting activity. The latest Index reading indicates that overall business conditions contracted to a level not experienced since late 2016. 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. Supplier deliveries expanded during the month and total new orders signaled no change, while all other components contracted. The Index-calculated as an average of its components was pulled lower primarily by quickly contracting activity in backlogs, exports and employment.

Historically, employment readings tend to lag behind other measures of business activity as shops are often hesitant to release quality laborers. For this reason, employment readings also tend to experience more modest swings as compared to other components. Recent employment data have challenged this trend as employment activity has experienced a sharp contraction that is more comparable to the more sensitive measures of the Business Index.  

Total new orders registered ‘no change’ at the same time that export orders were reported as more quickly contracting. The combination of these events suggests that domestic orders rose by the same level as exports orders fell in order to bring the total to a reading of 50.  Through September, exports have reported 15 consecutive months of contracting or unchanging activity levels.