Composites Index extends slowing contraction trend in August

The Composites Index increased marginally in August to close at 48.6. Rising index readings, which remain below a level of 50, indicate a slowing contraction in business activity.  The Index was led higher by production activity which increased by 5 points, sending it above the 50 line for the first time since February. Production was also the only measure which changed from contracting to expanding activity for August. The combination of expanding production coupled with contracting activity in new orders caused an accelerating contraction in backlog activity.  Further, data on supplier deliveries pointed to another month of slowing deliveries which hampers overall output levels and economic growth.  The three-month moving average at 59.5 is 4 points above the historical average reading for monthly supplier deliveries.

The COVID-19 pandemic’s economic impact on the composites fabrication industry has defied textbook examples of a recession, specifically because of its ability to shock both demand and supply. While in a classic recession there is a reduction in the demand for goods (which lowers sales), the pandemic has further reduced sales via disruptions in the supply chain. Thus, even when there has been a willing demand for a product, in many cases there has not been a product to sell. In either case — whether lost sales are due to a shift in demand or a lack of available supply — the drag on the economy is the same. The industry will need both supplier deliveries to quicken and an uptick in new orders for a successful recovery.