Supply chain challenges persist into the new year
Quickening expansion in new orders and production activity was counterbalanced by worsening contraction in export activity for the January Composites Index.
Improved readings for production and new orders activity were almost entirely offset by a sharp contraction in export activity.
The Composites Index extended its Q4 2020 rally with a January reading of 52.3. For the month, supplier deliveries, new orders and production activity supported the Index’s latest reading while employment, backlog and, in particular, export orders hindered further gains; more specifically, quickening expansion in new orders and production activity was counterbalanced by the worsening contraction in export activity. The supplier deliveries reading was little changed and remains near record levels.
The spread between supplier deliveries and production activity will be made worse if fabricators cannot capitalize on the current and (potentially) future improvements in new orders.
Having moved past the seasonal surge in shipping demand, January’s stubbornly high supplier delivery reading may suggest that network freight capacity was only a minor factor during the fourth quarter’s run-up. Never before in the Index’s history have supplier delivery and production readings been this far apart and for so long. The implications associated with this divergence are considerable, and could extend well beyond undermining production activity’s full potential. In particular, if the trend in expanding new orders persists, the current situation could at best cause backlogs to quickly rise, and at worst result in missed sales opportunities and strained customer relationships.
Related Content
-
Composites activity returned with accelerated contraction in September
The GBI: Composites contracted faster again in September, closing down 1.6 points to 45.9, the lowest the index has been in more than 2 years.
-
Composites industry saw stabilized contraction in October
The GBI: Composites Fabricating index has contracted for the seventh month in a row, with one notable change in component activity.
-
Composites industry index ends February in growth mode
The GBI: Composites Fabricating closed February at the same level it was in November 2022, right before experiencing a rare two months of contraction.