Contracting employment and production activity weigh on composites fabricators
Weak employment activity indicated by September readings compounds production supply chain woes.
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Composites Fabricating Index: The Composites Fabricating Index declined by more than 1.5 points due to contracting export orders, production and employment activity. Disrupted supply chains and a weak labor market severely impacted production in the third quarter.
The Gardner Business Index (GBI): Composites Fabricating declined by more than 1.5 points in September, closing at 55.4. Contractionary readings for export orders, production and employment activity more than offset higher readings for new orders, backlogs and supplier deliveries. The latest readings mark the first time that production and employment activity have contracted since the manufacturing industry rebounded from the initial shocks caused by COVID-19. Further, the latest supplier delivery reading increased by more than five points, setting a new all-time high.(Recall that higher supplier delivery readings signal worsening supply chain performance.)
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Employment and supply chain challenges weaken production: The third quarter of 2021 witnessed a dramatic change in employment activity. Simultaneous supply chain and employment challenges have both curtailed production and inflated backlogs.
The third quarter brought the problem of a diminished labor force into sharp focus for fabricators, as a scarcity of new hires resulted in more fabricators than not reporting declining payrolls. This latest labor deficit, coupled with the industry’s enduring supply chain problems, has cumulated in a materials and labor shortage that has debilitated production. Combined with record-high new orders readings from earlier in the year, fabricators faced a severe “production deficit” during Q3. This deficit, which peaked in June, waned by the end of the quarter thanks to slowing expansion in total new orders activity.
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