June Business Index Consistent with Strong Growth

Steven Kline, Jr.


With a reading of 55.5, the Gardner Business Index showed that the production machining industry expanded for the sixth month in a row in June. The rate of growth was unchanged and remained at its fastest rate since January. Compared with last June, the index was 23.9 percent higher. This is the ninth month in a row that the month-over-month rate of change has increased and the fastest rate of month-over-month growth in the history of the index. The annual rate of change, now at 10.0 percent, has grown at an accelerating rate the last 5 months.

New orders increased for the seventh straight month, but the rate of growth generally has slowed since January. Production has expanded the last 6 months and on a generally upward trend since September last year. Backlogs expanded for the fifth time in 6 months. Because of the trends in new orders and production, the rate of increase in backlogs has generally slowed in 2014. But, compared with 1 year ago, backlogs increased by 35.0 percent this month. Annually, backlogs have increased at a rapidly accelerating rate the last 6 months. This is a positive sign for future capacity utilization levels and capital spending. For the second month in a row, the employment index set a new all-time high. After growing in March, exports contracted for the third consecutive month. Supplier deliveries are lengthening at their fastest rate since July 2012.

Material prices have increased at a rapidly accelerating rate since March. They are now increasing at the fastest rate in the history of the index. Prices received have increased at noticeably accelerating rate the last 2 months. They are increasing at their fastest rate since March 2012. Future business expectations ticked up slightly in June, reaching their second highest level in the history of the index.

Better business conditions were record at all but the smallest facilities. The most dramatic increase in the rate of expansion occurred at facilities with 100-249 employees. These plants are growing at their fastest rate in the history of the index. After growing in May, shops with fewer than 20 employees contracted in June. These small shops have seen only 2 months of expansion since April 2012.

All but one region expanded in June. After 4 months of growth, the Southeast contracted at a very slight rate. The North Central – East was by far the fastest growing region, recording its fastest rate of growth since December 2011. Also growing were the Northeast, West, and North Central – West regions.

Future capital spending plans for the next 12 months reached their second highest level in the history of the index, approaching $1 million. Compared with 1 year ago, planned capital expenditures increased 59.3 percent. This was only the second time in the last 6 months that future spending plans increased compared with 1 year ago. The annual rate of change grew for the first time this year.