CompositesWorld
Issue link: https://cw.epubxp.com/i/841219
JULY 2017 12 CompositesWorld GARDNER BUSINESS INDEX: COMPOSITES US Composites index records its best reading in at least five years. » Registering 55.1 in May, the Gardner Business Index recorded its highest value for the US composites industry in more than five years. Underlying that headline number, the drivers of the overall Index through the end of May include Material Prices, Employ- ment, Production and New Orders. e Production, New Order and Employment components of the Composites index increased by 13%, 12%, and 7%, respectively, for the three-month period ending May 2017, using a 12/12 rate of change calculation. Production and New Orders are two of the most significant components of the Gardner Business Indices, and they suggest strength in the composites industry. A 12/12 ROC is calculated by summing the data for the most recent 12 months and then dividing that number by the sum of the values in the previous 12 months. Conversely, the Exports and Material Prices components of the Index are damping further optimism. e Exports component, which has in the past 12 months averaged a reading of just over 46, represents a weak spot in the Composites Index. Gardiner Business Intelligence (GBI) will be watching currency markets very closely in 2017 for many reasons, including the progression of Brexit, Ameri- ca's changing stance on free trade and trade agreements, and the US government's efforts to make markets more fair for American compa- nies. Any and all of these political factors could generate unexpected shocks to currencies and, thus, to import and export dynamics and volumes. e Material Prices and Prices Received index components, based on May 2017 data, indicate that input cost increases are being felt broadly and that manufacturers have yet to pass these costs on to their customers to the same degree. A comparison of the Material Prices and Prices Received index components, using a 12/12 ROC, reveals that the Material Price index has increased by more than 24% while the Prices Received index has only increased by 7%. Given the size of this gap, the Index might be signaling that the prices of finished composite components could rise in the future as Material Prices increases are passed downstream. GBI's view of the composites industry's future is bright. A recent study by the Congressional Budget Office indicated that between 20 and 40% of future GDP growth in the US will come from workforce expansion, with the remaining 60 to 80% of growth coming from productivity gains. is growth in productivity will result from the use of better, smarter and more capable machines, computers and other tools that enhance the abilities and expand the productivity of workers. As increasing wages and a limited labor supply begin to make themselves felt in the economy, equipment consumers should consider working closely with equipment manufacturers to find ways to meet their growth objectives. Now is truly an opportune time for those who use composites manu- facturing equipment to collaborate with those who manufacture it, to create the next generation of technologies that will power composites industry growth in an ever-expanding number of markets. May 2017 — 55.1 Michael Guckes is the chief economist for Gardner Business Intelligence, a division of Gardner Business Media (Cincinnati, OH US). He has performed econometric modeling and forecasting work since 2004, first for the State of Ohio, then for one of the 20 largest banks in the US and, most recently, one of Cincinnati's largest insurers. Michael received his BA in political science and economics from Kenyon College and his MBA from Ohio State University. mguckes@gardnerweb.com 60 50 40 A GBI reading of >50.0 indicates expansion; values <50.0 indicate contraction. May 16 June 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 55.1 GBI MAY 2017 Composites Input Cost are Not Being Passed Through to Customers Feb 14 Aug 14 Feb 15 Aug 15 Feb 16 Aug 16 Feb 17 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0 GBI US Composites Industry Index of Material Prices and Prices Received