Data signal a pivotal moment for composites industry

The August Composites Fabricating Index fell more than two points from July to close at 56.1. The month’s decline was primarily caused by a five-point and four-point fall in production and new orders activity respectively. The reading for supplier deliveries — which acts as a proxy for the timeliness of order fulfillment — indicated yet another month in which supply chains underserved fabricators who have faced a shortage of critical materials for most of the calendar year.

In the last two months, new orders and production readings have fallen to within one point of 50, a number that represents “no change” in month-to-month activities. Historically, such instances have immediately preceded a peak or a nadir — the lowest point — in the business cycle, indicated by a transition of readings across the 50 line. However, other survey measures contradict historic norms. For example, the industry is flush with backlog orders and relatively strong export orders. In addition, supply chain shortages and a tight labor market may be artificially reducing production readings. There is also the unprecedented rise in the negotiating power of fabricators to pass price increases onto their customers. The conflicting signals being sent from these measures make it difficult to confidently anticipate the industry’s future direction.