Gardner Intelligence Blog

In October, the nominal 10-year Treasury rate was 1.71%, staying under 2.00% for the third month in a row. October was the fifth month in a row in which the nominal 10-year Treasury rate averaged less than the Fed Funds Rate, which is the overnight lending rate. The 10-year Treasury rate falling below the Fed Funds rate tends to indicate a recession is ahead.

The annual rate of inflation according to the CPI was below 2.00% for the sixth month in a row 10th time in 11 months. As a result, the real 10-year Treasury rate was -0.08%. October was the fourth time in five months that the real 10-year Treasury rate was negative.

September machine tool orders were 1,980 units and $352,409,000.

Unit orders for the month contracted 30.9% compared with one year ago, marking contraction for the eighth-straight month and nine of the last 10 months. The large month-over-month contraction the last two months was expected as unit orders were affected by IMTS. In non-IMTS years, the average contraction in unit orders in September is -33.6% and the median contraction is -29.6% (excluding the two years where orders actually increased due to the industry coming out of significant contraction). So, the contraction the last two months is as expected as is the accelerating contraction in the annual rate of change, which is now -11.1%.

In October, the monetary base was $3.266 trillion, which was slightly higher than September’s level. While it was the 20th consecutive month of month-over-month contraction in the monetary base, October was the slowest rate of contraction since July 2018 and the third time in four months that the rate of contraction was slower than 10%. 

The annual rate of contraction in the money supply, -10.9%, was unchanged in October. It seems likely that the rate of contraction in the money supply has bottomed, which would be a positive sign for capital equipment consumption. A decelerating contraction in the annual rate of change in the money supply tends to lead to a decelerating contraction in capital equipment spending.

Looking at the Top Shops survey, an individual might wonder what it is that makes a machine shop profitable. To explain how we determine the key drivers of revenue and profit in machine shops, our Chief Data Officer Steve Kline is hosting a webinar to explain it in detail, but we can cover the broad strokes here.

Since 2012, more than 3,000 shops have responded to the Top Shops survey, providing us with a deep well of data. In addition to gathering numerical data, such as capacity utilization, lead time and profit margin, the survey gathers data on what machine tools, HR programs and improvement methodologies that see use in the shop. With that raw data, we get to work making sense of it.

New orders for real durable goods totaled $255,197 million in September, which was down 6.1% from one year ago. This was the third time in four months that new orders contracted more than 6.0%. Additionally, durable goods new orders contracted for the seventh time in eight months, and the rate of month-over-month contraction has generally accelerated. The result was that the annual rate of change contracted 2.0%, moving at a faster rate for the second-straight month. 

Compared with one year ago, new orders for motor vehicles and parts contracted 0.9%. This was the second consecutive month of month-over-month contraction. The annual rate of growth, now 3.9%, decelerated for the third month. This was the slowest rate of annual growth since August 2018