Gardner Intelligence Blog

The Gardner Business Index (GBI) finished September at 48.2, marking its third consecutive month of contracting business activity and falling over 16% from the same month one-year ago. Index readings above 50 indicate expanding activity while values below 50 indicate contracting activity. The further away a reading is from 50 the greater the magnitude of activity change. Gardner Intelligence’s review of the underlying data for the month observed that the Index – calculated as an average of its components – was supported by supplier deliveries and production. Backlogs and exports contracted the fastest during the month, pulling down the Index. Employment and new orders readings had little impact on the total index’s calculated result.

For a second month, firms between 100 and 250 employees in size reported the fastest rate of contracting business activity. Between the start of 2017 and mid-2019, firms of this size range frequently reported greater business activity expansion than shops of smaller size classes.  Additionally, those small shops were also the first to begin regularly reporting contracting business activity in late 2018. Despite having been the first to report contracting activity, smaller manufacturers in the year-to-date period have reported the softest rates of contracting activity when compared to their larger peers.

In August, the month-over-month rate of growth for durable goods spending was 5.6%, which was the fastest rate of growth since August 2018. Additionally, it was the fifth month in a row with growth faster than 4.0% and the fourth straight month of accelerating growth. The accelerating rate of growth was likely the result of the falling change in the real 10-year Treasury rate. Because the 10-year rate itself has dropped so low, durable goods spending is making up its largest share of all consumer spending ever. 

However, the annual rate of growth decelerated to 4.2%. This was the slowest annual rate of growth since September 2010, but with the recent month-over-month growth in durable goods spending and the declining year-over-year change in the 10-year Treasury rate , there could be some modest acceleration in the annual rate of growth heading into the fourth quarter.

Income Growth Below Average for Second Month

In August 2019, real disposable income was $15,073 billion, which was its highest level ever by quite a bit. However, the month-over-month rate of growth was 3.0%, which is slower than the historic average, for the second month in a row. Also, it was the slowest rate of growth since April 2017 and the first month. In 2019, the month-over-month rate of growth has been notably slower than it was in 2018.

The annual rate of growth remained decelerated to 3.4%, which was its slowest rate of growth since March 2018. Also, it was down from its peak rate of growth of 4.0% in December 2018. With noticeably slower month-over-month growth since the beginning of the year , it is likely that the annual rate of growth in disposable income will decelerate more in the months ahead.

Housing Permits Grow for Second Consecutive Month

There were 127,000 housing permits filed in August 2019. This was the most permits filed since June 2017 and the second most permits filed since June 2015. Additionally, the month-over-month change in permits grew 8.6%, increasing for the second straight month after six months in a row of contraction. August’s rate of month-over-month growth was the fastest since July 2018.

In August, the annual rate of change contracted at a decelerating rate after contracting faster each of the previous three months. The current rate of annual contraction is just -0.8%, and it should improve in the upcoming months based on the growth in permits the last two months.

Reports

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.