Gardner Intelligence Blog

In January, the nominal 10-year Treasury rate was 1.76%, which was down slightly from the previous two months. Also, this was the sixth month in a row the nominal rate was less than 2.00%. At the same time, inflation reached its highest annual rate since October 2018 and kept the real 10-year Treasury below zero for the fifth time in eight months. In January, the real rate was just -0.13%.

In January, the year-over-year change in the real 10-year Treasury rate was -0.44%, which was the 13^th consecutive month the change was negative. 

In January, the monetary base was $3.443 trillion, which was its highest level since November 2018. This was the second month in a row of month-over-month accelerating growth, which is a positive sign for capital equipment consumption.

The annual rate of contraction in the money supply, -8.1%, decelerated for third month in a row, which also is positive sign for capital equipment consumption. This was the slowest rate of annual contraction since February 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.

In January, durable goods capacity utilization was 74.7%, which was the second lowest rate of capacity utilization since September 2017. Compared with one year ago, capacity utilization contracted 2.4%. This was the eighth month in a row and the ninth of the last 10 months that capacity utilization contracted. 

The annual change in durable goods capacity utilization contracted at an accelerating rate for the third month in a row, falling from -0.7% to -1.1%. December was the fastest rate of annual contraction since April 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.

In January, the Index for production of durable goods was 105.0, which was the third lowest level for the index since July 2019. Compared with one year ago, the index contracted 0.9%, which was the fifth straight month of contraction.

The annual rate of change, which is easier to correlate with other data points, grew 0.3% this month. The annual rate of growth decelerated for the 11^th straight month. December’s growth rate was the slowest since May 2017, and it is likely to contract in the next month or two. Further, the key leading indicator of production—durable goods new orders—is indicating contraction in production.

December machine tool orders were 2,253 units and $397,555,000.

December’s unit orders were the highest since March 2019. On top of this, unit orders going back to December 2018 were revised upward a significant amount. This revision occurred mostly in the West and the month of August in the Southeast.