Suggest that you check that the dial gauge and reference surfaces are OK. Do this by holding the device in your hand and gently rotating the sensor mount. If the reference surface is clean and in good condition the dial gauge will show no deflection and the action will be silky smooth. The other thing to check is that the drill is not flexing and/or that the machine axis is not inclined. Also it is good practice to use the appropriate sensor arm with a co-axial centering gauge so that the extension matches the tool to be used.

These devices are common workshop tools.

Hope this helps - Regards - Pat