Gardner Intelligence Blog

Disposable Income Gets Revised for April

In April 2019, real disposable income was $14,575 billion, an increase of 2.2% compared with one year ago. That was the second slowest rate of income growth since February 2017 (only last month was slower). In addition to the slowing rate of growth – dropping from its peak of 3.6% in December 2017 – the previous five months of disposable income generally was revised lower. Typically, real disposable income sets an all-time high almost every single month, but April’s income level was lower than February 2018 and December 2017. 

The annual rate of growth was unchanged at 2.7%, but it was down from 2.8% growth in December through February. The annual rate of growth has been consistent at either 2.7% or 2.8% since January 2018. With March and April’s much slower growth, it is likely that the annual rate of growth in disposable income will decelerate more in the months ahead.


In February, Gardner provided a slowing-growth outlook for the packaging and container industry based on actual financial results from the third quarter of 2018 along with Wall Street’s consensus projections. At that time, capital expenditures had grown strongly over the trailing twelve months while earnings before interest, depreciation and amortization (EBITDA) were growing at nearly 15% and projected to grow even more quickly through the fourth quarter of 2019. The 2019 outlook for the industry at that time looked very promising.

There were 118,700 housing permits filed in April 2019. This was the most permits filed since June 2018 and the second consecutive month with more than 105,000 permits filed. While permits still contracted 1% month-over-month, the rate of contraction was the slowest in the last four months. With four-straight months of month-over-month contraction, the annual rate of change decelerated to 0.0% in April, making it the first month that housing permits failed to grow on an annual basis since September 2011.

However, the 10-year Treasury rate is indicating that the subtle signs of improvement in housing permits could continue in the months ahead. In April, the year-over-year change in the 10-year Treasury rate was -0.53%, which was sixth consecutive month the change declined and the fourth-straight month the change was below zero. April’s change in the rate was the lowest since January 2018. 

Cutting Tool Orders Leveled Off in March

In March, cutting-tool orders were $210.4 million, which was the 12th  time in 13 months that orders were more than $200 million. However, March orders decreased by 1.3% compared with one year ago, ending a string of 22-consecutive months of growth. While the annual rate of change was more than 10% for the sixth time in seven months in March, the rate of growth decelerated for the second month in a row to 10.1%.  

The GBI: Metalworking is a good leading indicator of cutting tool orders. The rate of change in the index began contracting in March. The Index is clearly indicating that slower growth is ahead for cutting tool orders. The GBI typically leads cutting tool orders by seven-to-10 months.

In April, the nominal 10-year Treasury rate declined for the sixth month in a row, dropping to 2.53% from a high of 3.15% in October 2018. This was the lowest nominal rate since December 2017. The nominal 10-year Treasury rate is just above the Fed Funds Rate, which is the overnight lending rate. The gap between the two rates is just 0.11%, which is unusually close together, indicating one of the two is “wrong.” The Fed is raising its rate due to extremely low unemployment and to keep inflation in check. The market sees a recession ahead as evidenced by the falling 10-year Treasury rate.

At the same time, the annual rate of inflation according to the CPI increased to its highest rate since November 2018. In April, the annual CPI was 2.00%, which was notable lower than its high of 2.95% in July 2018. For the second month in a row, the real 10-year Treasury rate was 0.27%, which was the lowest real rate since November 2017.


Top Shops

‘Top Shops’ is a benchmarking and recognition program designed to help shops build their business.

World Machine Tool Survey

An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.

Capital Spending Survey

An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more.

Gardner Business Index

A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.