Consumer spending continued to grow at an accelerating rate in January, which will lead to continued growth in durable new orders in the months ahead.
Real personal income jumped dramatically in January on the back of a new round of stimulus checks. Will an eventual reduction in stimulus mean that consumer spending will contract even faster? Perhaps not if the near record high personal savings rate falls to more recent normal levels.
Gardner Intelligence: Business Index 57.1 Business activity levels as recorded by the Gardner Business Index (GBI) expanded during February thanks to further activity gains in new orders, backlogs, and employment. Excluding export activity, all index components reported rising levels of business activity over the prior month. New orders and backlog readings for the month rose to levels last reported in mid-2018 and February’s employment activity matched readings last reported in mid-2019. The encouragement created by these gains however was tarnished by a 6-point rise in the supplier delivery reading. Rising delivery readings indicate that order-to-fulfillment times are lengthening and that manufacturers in general are struggling to obtain the upstream goods necessary to complete their orders. Removing the inflationary impact of the supplier delivery reading from the overall Index would have resulted in a March reading of 54.1, placing this series at its own 2½ year high.
The rate of capacity utilization increased for the ninth month in a row, which led to the annual rate of contraction bottoming out.
The annual rate of contraction in cutting tool orders has nearly bottomed. And, based on trends in the Gardner Business Index and macroeconomic manufacturing data, cutting tool orders should see double-digit growth by year-end.
The month-over-month rate of change has contracted at a decelerating rate since April, indicating that the annual rate of change is about to bottom.
Gardner’s new business activity tracking tool allows subscribers to see industry changes by material types and machines used. This will provide for example glass fiber and carbon fiber fabricators the ability to see independent trends in the composites industry by material type as opposed to composites industry activity overall. This new product will also monitor metalworking shops by specific equipment utilized including five axis machines, EDMs, and grinding among others.
As permits are seasonal, January’s permit total was the highest for January since 2006. Short-term trends are indicating that the annual rate of growth will accelerate in the upcoming months.
Compared with one year ago, January’s monetary base was up 52.4%, which was the fifth month in a row and seventh in the last nine months with faster than 50% growth.
The work of reinforcing and evolving manufacturing supply chains still has a long way to go in 2021. Firms which simply get their supply chain back to where it was pre-COVID will be exposed to inflating costs and the risk of lost sales opportunities.
For the first time since December 2018, the year-over-year change in the real 10-year treasury rate was positive.
Machine tool orders reached their highest level since September 2018 (the last in-person IMTS) and their highest level outside of an IMTS month in three years.
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