Solid Growth Continues

With a reading of 52.1, the Gardner Business Index showed that the finishing industry expanded for the second month in a row. The index virtually was at its highest level in the last eight months. Compared to one year ago, the index increased by 0.6 percent in February. This was the third straight month of modest month-over-month growth. The annual rate of growth slowed to 5.9 percent. This was the fifth month in a row that the annual rate of growth decelerated.

New orders expanded for the third straight in February, but the rate of increase was slower than last month. Production increased for the second month in a row and for the 13th time in 14 months. Backlogs continued to contract as the index moved a little lower than the previous month. However, for the second month in a row, the backlog index was higher than it was one year ago. As a result, the annual rate of change in backlogs grew at a slightly faster rate in February. This was a positive sign for future capacity utilization levels. Employment has grown every month but one since the beginning of 2014. Exports contracted for the second month as the dollar continued to strengthen against other currencies. Supplier deliveries lengthened at a much faster rate in February as the index reached its highest level since July 2012.

Material prices continued to increase at a slower and slower rate in February. The material price index fell to 54.0 in February from its peak of 70.4 in June 2014. Prices received fell off sharply in February. The index was easily at its lowest level since the survey began in December 2011. Future business expectations remained near their lowest level of the last 15 months.

While growth at larger facilities was still strong it did cool somewhat in February. Finishers with 20-49 employees contracted for the fourth straight month. Small finishing shops, those with 1-19 employees, expanded at an accelerating rate for the second month in a row. These finishers are growing at their fastest rate since April 2012.

The Southeast was the fastest growing region in February. It has had fairly strong growth since August 2014. It was followed by the West, which recorded its first substantial growth since June 2014, Northeast, and North Central – West. The North Central – East was flat after growing three of the previous four months.

Future capital spending plans have taken a hard hit the last four months. The month-over-month rate of change has contracted more than 27 percent in each of those months. And, the month-over-month rate of change has contracted in six of the last eight months. The annual rate of change has contracted for three straight months.