Gardner Intelligence Blog

There were 107,300 housing permits filed in December 2019. This was the lowest level for housing permits since March 2019. However, permits in December 2019 were up 12.5% compared with one year ago. Therefore, December was the sixth consecutive month of growth in housing permits. Also, this was the third month in the last four that housing permits increased more than 12%.

In December, the annual rate of change accelerated to 3.1%, which made it the fourth-straight month of accelerating growth. This was the fastest rate of annual growth since January 2019. The annual rate of growth will likely continue to accelerate in the months ahead, as the three-month rate of change was faster than 12% for the third month in a row.

In December, the monetary base was $3.427 trillion, which was its highest level since November 2018. This was the first month of month-over-month growth since February 2018, which is a positive sign for capital equipment consumption.

The annual rate of contraction in the money supply, -9.3%, decelerated for second month in a row, which also is positive sign for capital equipment consumption. It seems very likely that the rate of contraction in the money supply has bottomed. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.

In December, the Index for production of durable goods was 106.0, which was the third lowest level for the index in 2019. Compared with one year ago, the index contracted 1.0%, which was the fourth straight month of contraction.

The annual rate of change, which is easier to correlate with other data points, grew 0.7% this month. However, the annual rate of growth decelerated for the 10th​​​​-straight month. December’s growth rate was the slowest since June 2017, and it is likely to decelerate even more, as the month-over-month rate of growth has been relatively weak the last nine months. Further, the key leading indicator of production – durable goods new orders – is indicating slower growth in industrial production.

In December, durable goods capacity utilization was 75.2%, which was slightly below the average utilization for 2019. However, compared with one year ago, capacity utilization contracted 2.9%. This was the seventh month in a row and the eighth of last the nine months that capacity utilization contracted. Additionally, December’s month-over-month contraction was the second-fastest since August 2016.

The annual change in durable goods capacity utilization contracted at an accelerating rate for the second month in a row, falling from -0.2% to -0.7%. December was the fastest rate of annual contraction since May 2017. As the annual rate of change tends to lead capital equipment consumption by seven-to-10 months, capacity utilization is signaling accelerating contraction in capital equipment spending through at least the first half of 2020.

November machine tool orders were 1,853 units and $305,720,000.

Unit orders were under 2,000 – the mark of a healthy machine tool market – for the fifth time in seven months. Orders for the month contracted 26.8% compared with one year ago, marking contraction for the 10th-​​​​​​straight month and 11 of the last 12 months. This was the fourth-straight month with more than 25% month-over-month contraction. The annual rate of contraction, 15.1%, accelerated for the fourth month in a row and contracted at its fastest rate since August 2016.