Gardner Intelligence Blog
By: Steven Kline, Jr. 30. March 2020
Manufacturers Begin Making Significant Adjustments to Production
Ripple effects, effects that manufacturers could not tie directly to COVID-19 but believed to be a result of the pandemic, were experienced by 46% of manufacturers. Supplier lead times and supplier accessibility/responsiveness were the changes experienced that increased the most, with roughly 40% of manufacturers experiencing changes to both.
Ripple effects had a slightly more significant impact as the percent reporting these as major impacts increased to 31% from 26%. The impact on supplier lead times was more severe (major impact increased to 47% from 38%); however, the impact on supplier accessibility/responsiveness was even more severe (major impact increasing to 41% from 24%).
The percent of manufacturers adjusting budgets/spending, hiring/recruiting, and staffing/headcount increased notably as more than 30% of manufacturers made adjustments here. However, production/capacity changed more than any other adjustment from the prior week. Last week, 32% of manufacturers adjusted production/capacity compared with 15% the previous week.
This week 51% of manufacturers reported that the impact of contingency/backup plans were major versus just 35% the week prior. The change in impact of budgets/spending changes was very similar. The most significant change came in the severity of changes to production/capacity. This week, 63% of manufacturers reported the adjustment as having a major impact compared with 31% the prior week.
During the week of March 23rd, Gardner Intelligence conducted its fourth short survey to gauge the effects of COVID-19 on discrete parts manufacturers across all the industries that Gardner Business Media covers. The survey asked two basic questions:
For each of those questions, respondents were asked to compare the current state of their business to the norm prior to COVID-19 and rank the severity of the change or adjustment from minimal to moderate to major.
By: Steven Kline, Jr. 27. March 2020
Housing Permits Grow Faster than 12% for Third month
The change in the 10-year Treasury rate is a good leading indicator of housing permits and construction spending. A decreasing year-over-year change in the real 10-year Treasury rate should lead to increases in these data points down the line.
There were 100,800 housing permits filed in February 2020. Permits filed in February were up 12.4% compared with one year ago, which was the fifth time in six months that permits grew faster than 12%. February was the eighth consecutive month of growth in housing permits.
In February, the annual rate of growth accelerated to 5.7%, which made it the sixth-straight month of accelerating growth. This was the fastest rate of annual growth since July 2018. The annual rate of growth will likely continue to accelerate for a couple of more months before it is significantly affected by COVID-19.
By: Steven Kline, Jr. 26. March 2020
January Cutting Tool Orders Second Most Since August
The GBI rate of change does appear to be in the initial stages of a turn. If it bottoms in the first quarter of 2020, then it would be expected that the rate of change in cutting tool orders would bottom around the summer of 2020.
In January 2020, real cutting tool orders were $196.5 million, which was the second highest total since August 2019. Compared with one year ago, cutting tool orders contracted -9.8%, which marked the 11th consecutive month of month-over-month contraction. The annual rate of change contracted at an accelerating rate for the fourth month. The annual rate of contraction was 5.2%, which was the fastest rate of contraction since December 2016.
The GBI: Metalworking is a good leading indicator of cutting tool orders and leads cutting tool orders by seven-to-10 months. The annual rate of change in the Index has contracted for 12 straight months, clearly indicating that the annual rate of contraction in cutting tool orders will continue to accelerate. However, the GBI rate of change does appear to be in the initial stages of a turn. If it bottoms in the first quarter of 2020, then it would be expected that the rate of change in cutting tool orders would bottom around the summer of 2020.
By: Steven Kline, Jr. 24. March 2020
Monetary Base Growth Accelerates for Third Month in February
A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending. Typically, the money supply leads capital equipment consumption by at least 12 months.
In February, the monetary base was $3.455 trillion, which was its highest level since November 2018. This was the third month in a row of month-over-month accelerating growth, which is a positive sign for capital equipment consumption. February’s 3.0% rate of growth was the fastest since January 2018.
The annual rate of contraction in the money supply, -6.8%, decelerated for fourth month in a row, which also is positive sign for capital equipment consumption. This was the slowest rate of annual contraction since January 2019. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.
By: Steven Kline, Jr. 23. March 2020
Manufacturers Adjusting in Third Week of Coronavirus Survey
In the third week of the survey, the most significant change experienced was ripple effects, effects that manufacturers could not tie directly to COVID-19 but believed to be a result of the pandemic. The percent of respondents experiencing ripple effects increased to 35% from 24%.
This week there was a notable shift to moderate from severe impact for supplier accessibility/responsiveness while the severity of supplier lead times was generally unchanged.
There were significantly more manufacturers adjusting budgets/spending, staffing/headcount, and hiring/recruiting. In the third week of the survey, there were still relatively few manufacturers that had adjusted the production capability and capacity of their facilities.
The severity of contingency/backup plans increased to 36% major from 13% major the previous week. The adjustments to budgets/spending and hiring/recruiting were more severe while the adjustments to staffing/headcount were somewhat less severe.
During the week of March 16th, Gardner Intelligence conducted for the third time a short survey to gauge the effects of COVID-19 on discrete parts manufacturers across all the industries that Gardner Business Media covers. The survey asked two basic questions:
For each of those questions, respondents were asked to compare the current state of their business to the norm prior to COVID-19 and rank the severity of the change or adjustment from minimal to moderate to major.
Reports
‘Top Shops’ is a benchmarking and recognition program designed to help shops build their business.
An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.
An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more.
A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.