Gardner Intelligence Blog

Contraction in Monetary Base Decelerates for Third Month

In July, the monetary base was $3.276 trillion, which was the second lowest level since June 2013 (only May 2019 was lower). May was the 17th consecutive month of month-over-month contraction in the monetary base. For each of the last eight months, the month-over-month rate of contraction was faster than 10%. Only the 10-month period from June 1921 to March 1922 had a longer streak of double-digit month-over-month contraction . That said, the month-over-month rate of contraction actually decelerated for the third straight month.

The annual rate of change in the money supply continued to contract at an accelerating rate for the 10th month in a row, falling to -10.6%. This was the fastest rate of annual contraction in nearly a century, but this should change soon with the 1-month and 3-month rate of change both contracting at a decelerating rate. Though the money supply is indicating that the current decelerating growth in machine tool orders (and quite likely capital equipment in general) will continue for some time, we are starting to see the signs of a turn in the money supply that should lead to a turn in machine tool orders 12-18 months later.

New orders for real durable goods totaled $259,167 million in June, which was down 7.0% from one year ago. June was the fifth-straight month of accelerating contraction. The annual rate of growth decelerated for the eighth month in a row, moving from 1.4% to 0.8%. This was the slowest rate of annual growth since June 2017.

Compared with one year ago, new orders for motor vehicles and parts grew 2.4% in June. That was the second-slowest month-over-month rate of growth since July 2018. The annual rate of growth accelerated to 6.1%, but it is likely to decelerate in future months. 

According to Gardner’s survey data, smaller firms have reported slower growth in production activity during 2019, relative to larger firms with over 100 employees. In July, firms of all sizes reported contracting production activity for the first time in three years*. To learn more about customized business activity data sent to you monthly, email and ask about subscribing to the Gardner Business Index.


The Gardner Business Index (GBI) experienced its first contraction reading in over two years, registering 48.2 for July. The Index has fallen 13.9% 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 employment, which are often the slowest-responding components of the Index during a change in business activity. In contrast, new orders and production, the most sensitive Index components, both registered contracting readings for July – an event which has not happened since mid-2016. These components joined exports and backlogs in contracting during the month.

The contraction in both exports and new orders appears to have put additional pressure on backlog levels which fell to their lowest reading since September of 2016. These declines and the ongoing contraction of backlog and export readings likely played a contributing role to manufacturers slowing their production activity for the first time since July of 2016.

Growth in Durable Goods Spending Continues to Decelerate

In June, the month-over-month rate of growth for durable goods spending was 4.5%, which was fourth month in a row with faster than 4.0% growth. The moderate boost in the rate of growth was a 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, 4.5% month-over-month growth is below the historical average and one of the slower rates of growth since the first half of 2016. 

The annual rate of growth continued to decelerate, slowing to 4.4% in June. This was the slowest rate of annual rate of growth since April 2012, and the annual rate of growth was decelerating to nearly its slowest rate since coming out of the Great Recession.

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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.

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