August MBI at 57.0 – Growth Accelerates Slightly
By Steve Kline, Jr., Gardner Publications, Inc.
With new orders at a constant rate of growth and production growing significantly, the rate of growth in backlogs slowed noticeably.
With a reading of 57.0, the MBI showed that the metalworking industry saw a somewhat faster growth rate in August. The two most significant contributors to the slightly stronger growth rate were the production and exports sub-indices.
The Metalworking Business Index (MBI) is created from a monthly survey sent to manufacturing executives in the durable goods industries. The MBI is a diffusion index based on 50.0, functioning in the same way as the ISM’s PMI. When the MBI is above 50.0, the metalworking industry is expanding; when the MBI is below 50.0, the industry is contracting. The total MBI is a weighted average of the sub-indices for new orders, production, employment, inventories, exports, and supplier deliveries.
After one month of contraction, the production index moved up 15.7 percentage points, to 54.2 from 38.5. The production index has grown every month but one since July 2009. The export index showed an even larger increase, moving to 58.4 from 42.3.
In August, the dollar approached historic lows compared to other world currencies, which most likely led to the growth of exports for American manufacturers. With new orders at a constant rate of growth and production growing significantly, the rate of growth in backlogs slowed noticeably.
Also of note, the prices received index reached its highest rate of growth since the inception of the MBI. The trend of the prices received index has been consistently up since February 2009. Despite the strong growth in prices received, material prices continue to rise at even faster rate. The significant up trend in both of these indices is a sign of significant inflation in manufacturing and the economy in general.