While month-over-month growth is slowing, the recent rapidly accelerating growth in the monetary base should eventually lead to rapidly accelerating growth in machine tool orders and capital equipment in general. That accelerating growth in capital equipment orders should last into 2022.
April 2021 shipments of industrial machinery reached a multi-year high according to the Bureau of Labor Statistics, up 18.6% from a year ago.
In May, durable goods capacity utilization was 74.4%. For the last five months, capacity utilization was running at a rate similar to the rate prior to the economic lockdown.
The Wall Street Journal published an article on June 22nd, 2021, titled “Wage Gains at Factories Fall Behind Growth in Fast Food” (https://www.wsj.com/articles/wage-gains-at-factories-fall-behind-growth-in-fast-food-11624354200). The article is a great reminder that manufacturing leaders can win over prospective employees through creative “win-win” plans. Such plans often involve career-training and advancement, giving away tools or other incentives for notable performance. Other incentives that manufacturers are providing which set them apart from other employers include gym memberships or even access to an on-site gym. There are also many low-cost and free incentives that have been shared with me in the past such as company-sponsored ball teams or Friday lunch grill outs in the parking lot. The example in the article of having a Spanish-speaking manufacturing line, where workers who feel more comfortable speaking Spanish can work together on a particular line is yet another “free” idea that may be a strong incentive for some prospective workers.
The key leading indicator of production – durable goods new orders – has bottomed out, according to its rate of change, and is indicating that durable goods production should see accelerating growth in the second half of 2021.
If the latest data from Mexico’s statistical reporting arm, the National Institute of Statistics, Geography and Informatics (INEGI) provides any clue as to how busy FITMA will be, then we can expect it to be a blockbuster event.
April’s month-over-month rate of growth was the fastest since since May 2011. Of course, this fast growth rate, which was comparable to an IMTS month, was, in large part, due to an easy comparison with April 2020. On the other hand, this was the most units ordered in April since April 1998. Therefore, April 2021 was an extremely strong month for machine tool orders.
While the nominal 10-year Treasury rate was unchanged in April, the real 10-year Treasury rate fell to its lowest rate since June 1980. The reason for this was that the rate of inflation increased to 4.99% in May, which was the highest rate of inflation since August 2008.
Gardner Intelligence provides a brief overview of the state of U.S. manufacturing for the month ending May 2021 along with actionable insights based on its proprietary data from the Gardner Business Index.
Rising production costs abroad are likely to have a direct, but smaller, impact on U.S. goods
April was the fourth straight month of month-over-month growth in durable goods new orders. Due to the strong growth in April compared with the easy comparison with one year ago, a number of industries moved to accelerating growth from decelerating contraction on an annual basis.
The private sector cannot delay to act in ways that will structurally support the economy in the long-term while the government temporarily props up the economy through debt spending. The hard truth is that delaying any efforts to build a bigger and smarter labor force now -which is within the ability of many of our readers to control- will result in severe consequences later. Even though many industry leaders are overwhelmed with work now, there is no time to delay in building tomorrow’s workforce.
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